Debt Agreements

A debt agreement is a legally binding agreement between you and your creditors. It provides the opportunity to repay one fixed weekly, fortnightly or a monthly amount based on what you can afford – not what is owed.

Once your debt agreement is accepted, your creditors agree to freeze the outstanding balance of your included debts and stop any further interest, charges, and fees.

In simple terms, it is a formal payment arrangement where creditors agree to clear the remaining balance of the listed debt at the end of the debt agreement. This means you will save considerably when compared to paying the debts in full over the same period of time.

To be eligible for a debt agreement, you must:

• Show evidence of late payments or credit card/loan arrears.
• Not have been bankrupt or entered into a debt agreement in the last 10 years.
• Have unsecured debts, income, and assets within the allowable limits.

A debt agreement is becoming an increasingly popular option in Australia as an effective debt repayment strategy, however, it does utilise Part IX of the Bankruptcy Act.

It’s important to note that this may affect your chances of being approved for credit over the next 5 years (or until the Part 9 debt agreement is completed: whichever is longer). Your name will be listed on the National Personal Insolvency Index (NPII) and your credit file will be noted that you proposed a debt agreement.

In the event that your debt agreement is terminated, all debts will be fully reinstated and creditors will be allowed to resume their collection process and backdate any interest so it’s important to complete your debt agreement as much as possible.

Step 1: Gather Information

When preparing a debt agreement, we need to present your financial position in writing to your creditors. We are required to review your assets, debts, income, and expenses to show creditors that the agreed repayment amount is affordable.

Step 2: Debt Agreement Proposal

When we have all the information required, we will prepare the documents for you to read thoroughly and sign. The documents are then submitted to the Australian Financial Security Australia (AFSA) as soon as we receive your documents back.

Step 3: Debt Agreement Processing and Voting

AFSA will assess your eligibility and will forward a copy of the proposal to your creditors for their approval. Your creditors will have a 5-week voting period where they decide whether to accept the terms of your agreement.

During this time, your debts are frozen and all collection activity must stop. However, you must continue to pay your secured debts as they are not included in your debt agreement.

Step 4: Debt Agreement Acceptance

If the majority of creditors accept your debt agreement proposal, then your payment terms take effect immediately. Both you and your creditors will need to abide by the new terms of your payment arrangement, which is typically set over 3-5 years.

Your only requirement is to maintain your minimum payments throughout the life of the debt agreement.

Only provable unsecured debts can be included in your Debt Agreement such as:

• Credit cards and store cards
• Unsecured personal loans
• Payday loans
• Overdrawn bank accounts
• Store cards
• Trade accounts
• Medical bills
• School fees
• Utility accounts
• Rental arrears
• Tax debts

Secured debts, such as car loans and home loans, are not included in your debt agreement and must be paid separately. Non-provable debts like fines and debts incurred by fraud or after the debt agreement are also not included in your debt agreement.

If you’ve explored all of your other options for paying down your debt, a debt agreement can be a beneficial solution. It’s a suitable alternative to bankruptcy, and it can provide much-needed relief if you’re unable to manage your debts.

Here are the benefits of debt agreement:

• Avoid bankruptcy
• Pay what you can afford instead of what you owe
• Your debts won’t gain interest
• Creditors can’t continue to pursue you

It is very rare that a Debt Agreement Proposal prepared by Debt Busters is not accepted on the first occasion and even rarer still on the second. If your creditors do not accept your Debt Agreement Proposal, we will find out the reasons and then resubmit an amended proposal with more suitable terms for your creditors’ acceptance.

We adhere to the policies and procedures that we believe are in your best interests. We believe that you shouldn’t be further disadvantaged if we are not able to secure a Debt Agreement for you, especially since you are seeking debt relief. For this reason, we offer a full refund less any costs paid to external organisations in setting up your Debt Agreement Proposal if it was submitted and not accepted by creditors but passed our affordability and sustainability policy.

Take control of your debt today. For more information about our debt agreement process, please get in touch with a member of our friendly team now on 1300 368 322.