A Debt Agreement Administrator can be a company or a person who is licenced and registered with the Australian Financial Security Authority (AFSA) to set up and administer Debt Agreements.
Before you pay any money to get help with setting up a Debt Agreement, make sure that the person or company who you are dealing with is registered with AFSA. Our CEO is a fully licenced insolvency practitioner, so if for some reason you don’t wish to proceed with a Debt Agreement and you need to consider other insolvency services like Bankruptcy  or a Personal Insolvency Agreement your case can be handled here.
Debt Free is registered and licenced with AFSA and we have been helping Australians with Debt Agreements since 2006, so we have a proven track record as a Debt Agreement Administrator. We will carry out a debt assessment for free, so if you want to see what debt solution is most appropriate for you, give us a call on our toll free advice line 1800 462 767.

What is a Controlling Trustee?
A Controlling Trustee is usually an insolvency accountant (i.e. an accountant who is registered with AFSA as a Trustee in Bankruptcy) but a solicitor can also act as a Controlling Trustee. If you appoint a solicitor, they need to be a member of the Insolvency Practitioners Association of Australia. One advantage of appointing a Registered Trustee in Bankruptcy is that they can act as your Controlling Trustee and then act as the Trustee of your Personal Insolvency Agreement (if your proposal gets accepted by your creditors). A solicitor cannot act as the Trustee of your PIA.
Most people wouldn’t realise that the process to set up a Personal Insolvency Agreement is split into 2 parts.  The first part is the Controlling Trustee period (which usually lasts for 25 business days) and the second part (if the agreement gets accepted) is to administer the Personal Insolvency Agreement.
How do I appoint a Controlling Trustee?
A Controlling Trustee is appointed once you execute a document known as a 188 Authority. Once executed, the authority cannot be revoked (i.e. cancelled or withdrawn) and the Controlling Trustee will act for a minimum period of 25 working days (unless it is extended which we will explain below).
If you are a married couple and you have joint assets and or debts you have the option of submitting a joint proposal.  Submitting a joint proposal will bring many advantages including:

• A streamlined administration process;
• Reduced costs;
• Your debts will be pooled and settled by the one proposal.

What does a Controlling Trustee do?
Once appointed, your assets will be under the control of your Trustee so you won’t be able to sell them or deal with them in anyway without your Trustee’s permission.  Your trustee will immediately commence investigations, prepare a report to your creditors and then call a meeting of creditors.
Below is a step by step guide as to what a Controlling Trustee will do.
Complete an investigation
The Controlling Trustee will investigate what assets you own or have disposed of in recent years.  If you have disposed of assets in recent years, the Controlling Trustee must form a preliminary view if those assets could be “clawed back” in bankruptcy.
 Prepare a report
The Controlling Trustee will prepare a report to your creditors, which will include:

• Your financial details (including your income & expenses, your secured and unsecured debts & any assets owned outright);
• The results of the investigation (as discussed above);
• Your proposed Personal Insolvency Agreement; and
• A recommendation from your Controlling Trustee as to whether the creditor’s interests would be better met by accepting your proposal or whether their interests would be better met by you being made bankrupt.

Hold a Meeting of your Creditors
The Controlling Trustee must hold a meeting of your creditors within 25 business days of being appointed which you will need to attend by phone or in person.  This meeting may be adjourned if additional investigations need to be completed by the Controlling Trustee. If an outcome isn’t decided by creditors within 4 months of the 188 authority being signed, the authority will lapse. You cannot sign another 188 authority within 6 months of signing the first authority.
In most cases an outcome is usually decided at the first meeting.  For the proposal to be accepted, creditors present and voting at the meeting must represent a clear majority and hold 75% of the debt (calculated in value).
What happens after the Meeting of Creditors?
If creditors accept the proposal the Controlling Trustee will end and a Trustee to administer the Personal Insolvency Agreement will be appointed.
If the creditors reject the proposal, they will usually pass a resolution for you to file a debtors’ petition and become bankrupt.
If you are thinking about appointing a Controlling Trustee so you can propose a Personal Insolvency Agreement then give us a call.  We have a Trustee on staff who will be happy to help.  Call us now on our toll free line 1800 462 767.
 

What is a Debt Agreement Proposal?
A Debt Agreement proposal is an offer made in the form of a contract between you, your creditors and your Registered Debt Agreement Administrator. It must contain your personal financial information and your offer to settle your unsecured debts. Your proposal must be set out in the approved form supplied by AFSA and the prescribed processing fee must be paid before AFSA will distribute it to your creditors for voting.

How do I go about setting up a Debt Agreement Proposal?

Most people engage the services of a Registered Debt Agreement Administrator (RDAA) to help prepare the Debt Agreement Proposal. Debt Free is a RDAA and we will start the process by collecting the following information from you:

• Your personal details
• Your salary
• Your expenses
• Your unsecured debts
• Your secured debts
• Your assets owned outright

Once this information has been collected and validated we will be able to work out how much you can afford to repay to your creditors.  We usually recommend that you make regular payments which match your payroll cycle (like weekly, fortnightly or monthly).  As part of our assessment process we will also work out how many years your Debt Agreement will need to run for.  Most agreements run for between 3 to 5 years but we assess each case individually to tailor the proposed dividend to what we think your creditors are likely to accept. There is no point in spending the time & money in preparing a proposal unless it is likely to be accepted by your creditors.
Here at Debt Free we have a unique debt assessment system which we have developed over a number of years which will work out the best Debt Agreement proposal to suit your budget and also meet the needs of the your creditors.
If you are thinking about proposing a Debt Agreement give us a call.  We will do a financial assessment for free to make sure that a Debt Agreement suits your individual circumstances.  Call us now on our toll free line 1800 462 767.
 

Entering into a Debt Agreement will not always mean that you will have to sell your car but given many different scenarios can arise each case needs to be reviewed individually. At Debt Free Australia we offer a free debt assessment.
Let explore some of the more common situations we come across.

What happens if my car is leased?

If you have a leased car and you want to keep it, then most people simply continue to pay the lease payments in the ordinary course.  When we help you prepare a Debt Agreement proposal we will first prepare a budget to make sure that you can continue to pay for all of your existing financial commitments as well as your debts.
If you have no equity in your car or negative equity in it (meaning the amount outstanding on the lease exceeds the value of the car) then you have 2 choices:

1. I want to keep my car – If you want to keep your car all you need to do is to simply keep paying the lease payments in the ordinary course.  What you need to be mindful of is whether a “balloon payment” or “residual payment” will become payable during the Debt Agreement.  This may create an issue as you will need to either “refinance” the lease or pay it out.  If you have negative equity in the lease at the time that you enter into the Debt Agreement, the leasing company would be entitled to claim for dividends from your Debt Agreement for the “estimated shortfall”.  This may affect the estimated dividend to your unsecured creditors.
2. I want to sell my car– If you don’t want to keep your car (due to the negative equity in it) then you should surrender it to the leasing company prior to entering into your Debt Agreement.  This way, you will be able to include any “actual shortfall” from the sale of the car in your Debt Agreement.  Going down this path will eliminate all of your debts and will allow you to start afresh.  Of course, many factors need to be taken into account before you would consider this – for example:
   1. Can you afford to buy a car outright if you surrender your leased car?
   2. It is unlikely you will be able to lease another car until your Debt Agreement is successfully completed.

Is there a limit on the value of the car I can have?

The value of your car or your combined assets (including the equity on your house) cannot exceed $103,121.20. If the equity in your combined assets exceed this amount then you would need to consider a Personal Insolvency Agreement instead.

Can I sell my car later?

If you wish to sell your car after you have entered into a Debt Agreement, then you will be free to do so.
If your car is leased it is unlikely you will be able to lease another car until your Debt Agreement has been successfully completed.  Whilst you are subject to a Debt Agreement you can’t apply for credit exceeding $5,259, without disclosing to the party that you are in a Debt Agreement.

Will my car be protected under the Debt Agreement?

Once you enter into a Debt Agreement you will be protected against any legal action your unsecured creditors may wish to take.  This means that they will be prevented from commencing any bankruptcy proceedings against you or obtaining any type of writ against your car. As long as you fully comply with the terms your Debt Agreement (i.e. you make the payments as required) you will be legally protected.
This is one of the biggest advantages of entering into a Debt Agreement compared to bankruptcy.
If you have a car (either leased or owned outright) and want to protect it, then give us a call.  Debt Free Australia are industry leaders in personal insolvency services. We won’t charge any fee until we have fully assessed your case and have confirmed that a Debt Agreement is the best solution for you. Call us now on our toll free line 1800 462 767.

Entering into a Debt Agreement will not always mean that you will have to sell your house, but there are some situations where you would need to sell it, which we will explain in this article.  There may also be circumstances where it may be more beneficial for you to surrender your house to your mortgagee and allow it to be sold. This is particularly the case if you owe significantly more on the mortgage than what the house is worth. If this is your situation, please read below for more information.

How does a DA affect my current mortgage?

If you wish to keep your house and your creditors have agreed to your Debt Agreement proposal, then most banks will not take any adverse action against you as the borrower as long as you continue to make the mortgage payments in the usual course.

What if I have equity in my property – will my creditors still agree to my proposal?

Having equity in your house again doesn’t always prevent you from entering into a Debt Agreement, unless the equity exceeds the amounts you owe your creditors or the equity exceeds the statutory thresholds.  Lets explore these two issues further:

1. If the equity in your house exceeds the statutory threshold amount of $103,121.20 then you will no longer be able to propose a Debt Agreement and would need to consider a Personal Insolvency Agreement instead;
2. If the equity exceeds the amounts you owe your creditors, then your creditors will most likely expect you to either:
   1. Refinance your mortgage to repay your debts; or
   2. Sell the house to repay them.

What if I owe more than what my house is worth?

If you owe more to the bank than what your house is worth, then you have 2 choices:

1. If you want to keep your house that will usually be fine as long as you can afford to keep paying the mortgage. The bank would, however, be entitled to claims for dividends from your Debt Agreement for the “estimated shortfall”.  This may affect the estimated dividend to your unsecured creditors.
2. If you don’t want to keep the house (due to the negative equity in it) then you should surrender it to the bank before entering into a Debt Agreement.  This way, you will be able to include any “actual shortfall” from the sale of the house in the Debt Agreement.  Going down this path will eliminate all of your debt and will allow you to start afresh.  Of course, many factors need to be taken into account before you would consider this (for example you would need to consider the property market generally – for example:
   1. are house prices going up or down?
   2. how much stamp duty and other costs would you lose if you sold?

Can I sell my house later?

If you wish to sell your house after you have entered into a Debt Agreement, then you are free to do so.  This flexibility is not available in bankruptcy.

Will my house be protected under the Debt Agreement?

Once you enter into a Debt Agreement you will be protected from any legal action by your unsecured creditors.  This means that they will be prevented from commencing any bankruptcy proceedings against you or obtaining any type of writ against your house. As long as you fully comply with your Debt Agreement (i.e. you make the payments as required) you will be legally protected.
This is one of the biggest advantages of entering into a Debt Agreement compared to bankruptcy.
If you have a house and want to protect the equity in it, then give us a call.  Debt Free Australia are industry leaders in personal insolvency services. We won’t charge any fee until we have fully assessed your case and have confirmed that a Debt Agreement is the best solution for you. Call us now on our toll free line 1800 462 767.