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Case Study Problem: Overcommitment

Once Kim finished her studies she gained a casual job.  She was delighted to transition from a struggling student to having a wage.  After about 6 months Kim found that the banks and lenders were making offers of credit and store cards.

Kim took up these offers believing she would be able to pay them back. She used the funds to go on holiday, fund shopping, and various other purchases.

The following year, Kim’s hours were reduced at work which meant she began to struggle to pay her debts and she found herself over-committed with credit.

She applied for a Debt Consolidation Loan, however, due to lack of capacity she was unable to get a loan, despite trying with a few different banks.

The debts which she was previously able to cope with on her old income were no longer manageable.  Kim was in arrears and unable to catch up.  As she was still working, her lender’s refused to grant her Hardship Relief.

Some creditors have begun collections action and Kim is becoming very stressed—she is now avoids calls on her phone.  Kim just ignores it, hoping that things will get better. 

The next month she receives a Letter with a “Notice of Assignment” – one of her Creditors have sold the debt to a Debt Purchasing Agency who are demanding unrealistic repayments.  Furthermore, they are threatening  legal action.

Kim is scared of Court Action; she does not want to go Bankrupt, however, she is unable to make all the payments the creditors are demanding and is unsure what she can do. 

She makes an appointment with a Financial Counsellor who advises that a Part IX Debt Agreement or Bankruptcy are the remaining options.  Kim does not want to go bankrupt.




Minimum Payment

Credit Card #1


$96 per month

Credit Card #2


$167 per month

Credit Card #3


$249 per month



$512 per month

An overview of Kim’s debts

Debt Solution:  Part IX Debt Agreement

Kim contacted the team at Life After Debt ®. After discussing her full circumstances, she was advised that a Part IX Debt Agreement would likely be the best option.

Kim was made aware by Life After Debt ® that;

  • A Debt Agreement is a compromise on unmanageable unsecured debts which enables the individual to avoid Bankruptcy. All unsecured debts must be included and Kim must meet certain eligibility criteria.
  • Once the offer is accepted, she would be left with one manageable repayment based upon what she can afford, rather than what each Creditor is demanding.
  • Kim would have protection from any further collections harassment, legal or recovery action.
  • Interest on the debts is frozen.
  • Not all Creditors have to agree to the offer for it to be accepted.  The outcome is decided by the majority of creditors in dollar value.
  • A listing would be placed on Kim’s credit file which would remain there for 5 years and her details would be recorded on a Government database called the NPII.
  • As the Administrator, Life After Debt would receive an administration fee which would be deducted from the contributions to Creditors.
  • As the Debt Agreement is processed by a Government department called AFSA, they would receive a realisations charge which would be deducted from her contributions to Creditors.

Summary Result (Once Accepted)

· Reduced repayments from $512 p/m to $285 p/m (a reduction of $227 p/m)

· She will be debt-free in 3 years

· Credit file listing will be removed in 5 years

· Avoids legal action by Creditors

· Interest on debt is frozen

· Fees are largely absorbed by contributions to Creditors

· She avoids the longer lasting effects of Bankruptcy

Please note that this is an example only and not an actual case.