Part 9 Debt Agreement
If you can’t meet all your debts, your creditors may consider a debt agreement – aka Part 9, Part IX or just a Debt Agreement. This legally binding debt agreement taken from Part IX of the Bankruptcy Act (1966), can freeze all interest charges on your outstanding unsecured debts, can extend these repayments over a longer period of time and see your creditors agreeing to receiving less than 100% of the debt due.
Creditors might consider a Part IX debt agreement proposal in a situation where the debtor cannot meet all of his/her commitments as and when they fall due for payment. For this to happen, your creditors will want to see a range of detailed financial information before they will accept any debt agreement.
Debt Agreements – The Process
Here at Life After Debt ®, we gather information for you and will negotiate with your creditors for the best possible terms. We also work with you to develop a household budget, ensuring you’re able to comfortably make repayments in the future.
Life After Debt ® will contact your creditors to confirm all account details and you will provide a list of supporting documents. We complete background and due diligence checks whilst drawing up the formal Debt Agreement Proposal. We will explain the documents to in detail before you sign. The Part 9 document is then submitted to the AFSA (Australian Financial Security Authority) for processing. Your Creditors will have 5 weeks to consider and vote upon your offer and as long as the majority in value agree to the Proposal then it is accepted and binding on all Creditors. Once approved, you will only be required to make the repayments you have previously outlined in the Debt Agreement. As long as you meet the terms of the agreement, your unsecured creditors cannot take any further action against you.
Part 9 Debt Agreement Vs Informal Agreements
A Debt Agreement differs from an Informal Agreement in that it will be recorded on the NPII (National Personal Insolvency Index) and on your credit file with Equifax (formerly Veda Advantage). As this information will be listed on your credit file for five years, you may find it difficult to obtain further credit during this time. The listing will be removed from your credit file 5 years after the listing or once the Debt Agreement is completed, whichever is longer.
To be eligible for a Debt Agreement in Australia you must not have been bankrupt, had a previous debt agreement or been given a Part X authority within the previous ten (10) years. You must also meet the following criteria:
- Income of less than $88,547.55 net (after tax) pa (or approximately $124,800 gross pa.)
- Unsecured debts of less than $118,063.40
- Divisible assets (or equity in assets) available to creditors of less than $236,126.80
Eligible debts that can be combined into a Debt Agreement
The debts that can be paid off under a debt agreement must be unsecured. This means that if you fail to pay your agreed instalments, the lender cannot repossess an asset; EG, your house, your car, household goods / furniture. The total amount of your unsecured debt needs to be below the indexed amounts listed above to enter into a Debt Agreement. To enquire about your debt solution today, call Life After Debt® today to speak with a consultant.
- Credit card debt
- Store card debt
- Personal loans
- ATO debts
- Professional debts from accountants, lawyers etc
- Medical bills
- Phone bills
- Centrelink debt
- Unpaid rent from a previous tenancy
- Trade debt including all suppliers
- Shortfall debt on repossessed goods and vehicles
All secured debts must be maintained separately to ensure that the secured asset (EG house / car / etc) is not put at risk. That is, if you do not make your payments the lender can repossess the security e.g. your house. However, part of the assessment of your debt agreement is to draw up a manageable budget which will make an allowance for you to continue paying these commitments. Our aim is to find a manageable and affordable debt solution which takes into account all of your financial circumstances.
- Mortgage debt
- Car and/or other Vehicle loans
- Goods on hire purchase agreement
- Other secured debts, such as loans secured against your household goods
Certain debts are excluded from a Debt Agreement by law and alternate arrangements must be made for payment.
- Child support arrears**
- Non-fixed Court Ordered Restitution
- HECS / HELP debt
To determine the right solution for you, call 1300 237 669 now for a free consultation.
** Child support arrears balance must be included however balance is not extinguished upon completion.