Being in debt can be very stressful. A debt agreement may help you if you are experiencing unmanageable debt. A debt agreement is one option that may assist you to pay off your debt over time.
A debt agreement is a binding agreement between a debtor (you) and creditors (the people you owe money to) where creditors agree to accept a sum of money that the debtor can afford.
This means that your repayments will be set at a level that you can manage to pay. So payments made by you are based on your capacity to pay, depending on your income and your expenses.
A debt agreement is an alternative to declaring bankruptcy where your creditors will be paid in proportion to the debt. It is also an alternative to debt consolidation or personal insolvency agreements.
Depending on your circumstances a debt agreement will let you make:
- weekly or monthly payments
- deferral of payments for an agreed period
- the sale of an asset to pay creditors
- a lump sum payment to be divided among creditors.
Debt agreements are not:
- consolidation loans
- agreements to borrow money
- able to have you released from all types of debts
- always an appropriate solution
It is important to consider all the options available to you and find solutions that are right for you.
Entering into a debt agreement requires you to make a debt agreement proposal. There are some eligibility restrictions that apply to making a debt agreement proposal.
Are you eligible to make a debt agreement proposal
You are eligible to lodge a debt agreement proposal if you:
- Are unable to pay your debts or are finding your debts unmanageable
- have not been bankrupt,
- have not had a debt agreement in the last 10 years
- have unsecured debts, assets and after-tax income for the next 12 months all less than set limits.
During the voting period your creditors cannot take or force debt recovery action against you. Some consequences of debt agreements include:
- Your name will be placed on the National Personal Insolvency Index
- You may find it difficult to get credit
- Your name could be placed on a credit reporting organisations records for up to 7 years and noted in the NPII.
- Your creditors may sell any assets you have offered as security, if the agreed debt repayments are not made.
I think a debt agreement might be right for me – what next?
There are many things to consider before making a final commitment to enter into a debt agreement. It is important to get professional help and advice. Please contact us to learn more about the benefits and consequences so that you can decide if a debt agreement is suitable to you.
A debt agreement administrator will provide advice specific to your circumstances, give you advice on the best solution for you and help you to make a proposal to your creditors as to how and when the money will be paid.
If you decide that a debt agreement is right for you, you will need to lodge your proposal with the government at Insolvency and Trustee Service Australia (ITSA). A debt agreement administrator will help you with that.
You will be charged a fee to lodge the proposal and the debt agreement administrator will also charge a fee to draw up the proposal and manage the agreement on your behalf.
If the debt agreement is accepted, while you are not bankrupt, you are committing an act of bankruptcy. Your name will appear on a National Personal Insolvency Index and may also appear on a credit reporting agency record for up to seven years. This may affect your ability to obtain further credit.
Once you have entered into a debt agreement, you will be released from your debts when all payments are made and obligations met under the agreement.
While you are not bankrupt, you are committing an act of bankruptcy so it is worth taking advice on the options that are available to you. If you think that a debt agreement will be the right solution for you, or simply need to talk to someone about your options, then call Debt Agreement Solutions on 1300 653 962. Let Debt Agreement Solutions help you get your life back on track.