A part 9 debt agreement is a legally binding contract between yourself and your creditors, stating that you will repay your debts.
The agreement will be based on what you can realistically afford to pay and the periods it is paid over will vary.
Entering into a debt agreement is a big decision, so it is important you take some steps to both prepare yourself and ensure you are knowledgeable on the matter.
Part 9 Debt Agreement Options
A debt agreement may feel like a last resort but know that there are other options available to you, as established under the Bankruptcy Act 1966, that may be a better fit for you.
Other official options, as stated by the AFSA site, are temporary debt protection (TDP), bankruptcy, and personal insolvency agreements.
Temporary debt protection is a 21-day period in which creditors are prevented from pursuing debtors in order for them to decide what the best choice moving forward may be.
Bankruptcy, lasting over a 3-year and 1-day period, is the process of an appointed trustee attempting to collect maximum funds from a debtor.
At the end of the aforementioned period, the debtor is released from all debts (with some exceptions).
Get Help with a Part 9 Debt Agreement
Before you dive right into a debt agreement, you may want to consider seeking the help of a professional, such as a financial advisor or counsellor.
A financial counsellor is an individual trained in the profession of assisting individuals with money-related issues, especially those who are bordering insolvency or bankruptcy.
They are available in all Australian states and territories and provide free, confidential advice.
When Should I Consider a Debt Agreement?
Debt can be really overwhelming.
No matter your financial situation or the types of debts you have, they can cause a lot of stress in your daily life.
However, if debts become too much to handle and you’re finding yourself constantly late for deadlines or simply unable to gather the funds to pay at all, a debt agreement may be for you.
With a debt agreement, you can negotiate your payments of debts in an open, honest manner with your creditors, creating a comprehensive plan that works for all involved parties.
Many make the mistake of immediately turning to bankruptcy when unable to pay off debts.
Bankruptcy is not the only option, and a debt agreement can save you a lot of the future implications declaring bankruptcy has on your financial future.
What are the Consequences of a Debt Agreement?
Entering into a debt agreement may seem like the best option in the case of insolvency.
However, despite its benefits, it does come with some negative consequences also. These may include:
- Your participation in a debt agreement will appear on your credit record for a minimum of 5 years or until you complete the obligations established on the agreement, whichever is longer. This may affect the likelihood of receiving loans from banks and just your credit score in general.
- Your name will appear on the Nation Personal Insolvency Index (NPII) which is accessible to the public.
- Participating in a debt agreement is considered an act of bankruptcy.
- If you wish to apply for credit, you will be legally obligated to inform creditors of your participation in a debt agreement.
- If your debt agreement is accepted by your creditors, you’ll be required to stay up-to-date on (regular) payments and stick to your budgeting.
Am I Eligible for a Part IX Agreement?
So, you may be wondering if you can apply for a part IX debt agreement.
There are 3 main criteria in discovering whether or not you can apply for a debt agreement, all of which have to apply to be eligible. These include:
- You cannot pay your debts by the contracted due dates;
- You have not filed for bankruptcy or any other insolvency agreement within the previous ten years;
- Your post-tax income, assets, and unsecured debts are below the assigned threshold limit within the next year.
Thresholds in debt agreements practically describe the maximum amount of money that your debts and assets can add up to in order to be eligible for a part IX debt agreement.
These thresholds, as directly stated by the Australian Financial Security Authority (AFSA), are:
| Limit, threshold, or payment | Amount | Bankruptcy Act & Regulations |
| Debts: You can’t propose a debt agreement if your unsecured debts add up to more than this limit. | $123,578.00 | s185C(4)(b) & (5) |
| Property: You can’t propose a debt agreement if your divisible property adds up to more than this limit.
Divisible property is property that could be sold by your trustee if you were bankrupt. |
$247,156.00 | s185C(4) (c) & (5) |
| Income: You can’t propose a debt agreement if your after-tax income for the year is over this limit. | $92,683.50 | s185C(4)(d) & (5) |
How do I Apply for an Agreement?
There are several steps to be made when trying to enter into a debt agreement. These include:
- Ensure a debt agreement is the best option for you and that you’ve thoroughly considered the consequences of making such an agreement.
- Once you are 100% sure that you want to follow through with it, and you’ve done adequate research on the matter and the potential benefits/consequences, you will have to decide on a registered debt agreement administrator to help you to create your agreement or proposal. When deciding on your debt agreement administrator, their certain characteristics you may want to look out for. These include fairness, experience, and knowledge in the field, as well as a wide cliental history, as this may develop their skills in dealing with different types of creditors.
- Your proposal will then be lodged with AFSA within the 14-day following the signing of the contract. AFSA will then send the proposal out to your creditors for voting.
- Your debt agreement proposal will be discussed with creditors and voted on. Provided they accept your proposal, it will be put into action effective immediately.