Debt Agreement

WHAT IS A DEBT AGREEMENT

PART IX OF BANKRUPTCY ACT

A legal and binding agreement between clients and their creditors.
Also referred to as a Part IX of the Bankruptcy Act.
Alternative for clients and their creditors to bankruptcy.
Agreement includes a proposal to your creditors of terms you can afford to deal with their debts.
If the creditors agree this is then processed through the Government Agency known as the Insolvency Trustee Service of Australia (ITSA).

HOW DOES IT WORK

Complete an assessment form that details your income, debts and a budget
Identify any surplus in the budget you are able to afford to repay your creditors
Proposal is then prepared and forwarded to creditors for their consideration and vote.
If accepted by majority of the creditors, you are now able to commence payments for the agreed term at a reduced rate.

WHO IS ELIGIBLE

There are certain guidelines and thresholds that clients must meet in order to be eligible:-

• No previous bankruptcy, Debt Agreement or Part X of the Bankruptcy Act in the last 10 years
• Income after tax must be less than $54,928 ($1,056 per week) net per annum (per applicant)
• Unsecured debts must be less than $73,237 and they must not own property (not exempt under bankruptcy) valued at more than $73,237.
  (These thresholds are updated according to CPI, figures shown here are current as at August 2006).

BENEFITS

The benefits of entering into a Part IX Debt Agreement are many:-

• Avoid official bankruptcy
• No limitations to clients lifestyle, currently or in the future
• Able to continue to improve financial wellbeing
• Combine unsecured debts into one regular repayment
• Lower & more manageable repayments
• Debts are frozen upon approval of the Debt Agreement – no further interest is added to loans
• Repayments made to the Debt Agreement come directly off the principal outstanding
• Moratorium on repayments during the Debt Agreement application process
• No further calls, letters or harassment from creditors chasing payments
• One central contact point for liaison
• Debt Administrator negotiates terms of Debt Agreement on your behalf
• Not all creditors need to agree to proposal (majority agree or 75% of dollar amount)

CONSEQUENCES

Quite simply, make no mistake, if clients fail to meet your obligations under the debt agreement by not making repayments on time and in full, the creditors are able to pursue all avenues for recovery. They are also able to terminate or declare the agreement void. Clients’ credit file will reflect the Debt Agreement application being made.