A Debt Agreement is an ideal solution for many people who are struggling to pay unmanageable debt. It is not without negative consequences though; because it results in the banks missing out on some of the repayments and interest that they are entitled to, there has to be a downside to it to help keep the system fair. But there are also many positive consequences of entering into a Debt Agreement, and these should be weighed against the negatives before deciding to go ahead so that you feel confident in your decision.

The main negative consequence of entering into a Debt Agreement is that it places a default on your credit file for a period of 7 years. There is also a permanent record placed on the National Personal Insolvency Index, but this is rarely accessed because you must pay a fee to do so, so most people are generally only concerned with the credit file default. Practically speaking, this means that you would not be gaining any new credit for a while – certainly, whilst you are under the Agreement, you would not be applying for more credit (and in some circumstances it is actually an offence to do so), and after you come out of it there will be a period of maybe 2-4 years where any credit applications would be subject to closer scrutiny by the banks. Note that this can also impact on applications for new phone plans, utility connections, and the like, and that if you are a Sole Trader or in a Partnership it might affect the way that you run your business.

Don’t forget though, that it was credit that got you into this situation in the first place. Not being able to get more for a while is seen by many people as a good thing! As are some of the more positive consequences of entering into a Debt Agreement, such as legal protection from recovery action; reduced payments; frozen interest; and a foreseeable end to your unsecured debt. In many cases, the upsides to a Debt Agreement are enough to outweigh the downs, and a credit file default looked upon as a small price to pay.

If you are considering entering into a Debt Agreement, call our professional debt advisors so you can get fully informed of all consequences, both good and bad, before making your decision. Our debt consultants have years of experience in setting up and maintaining Debt Agreements and will be able to advise you on all aspects of the process, allowing you to make a fully informed and comfortable choice. Call us today on 1800 676 598.

An “Act of Bankruptcy” is an act which a person commits which a creditor can then reply upon to approach the Court for a bankruptcy order to be issued.
There are many types of situations where someone can commit an “Act of Bankruptcy” but the most common types relied upon by creditors in bankruptcy applications are:

1. Failing to comply with a Bankruptcy Notice;
2. Leaving Australia with the intent to defeat or delay your creditors;
3. Keeping house with the intent to defeat or delay your creditors;
4. Departing your usual house or place of business with the intent to defeat or delay your creditors;
5. Sending your creditors a notice that you intent to suspend or have suspended payment;
6. Signing a proposal for a debt agreement;
7. Signing a 188 authority to initiate a personal insolvency agreement.

If you commit an Act of Bankruptcy, a creditor who is owed $5,000 or more can petition the Court to make you bankrupt.
If you are concerned about committing an Act of Bankruptcy, call the bankruptcy experts at Debt Free Australia on 1800 676 598. Our bankruptcy consultants have years of experience and will be able to give you accurate and impartial advice on all aspects of bankruptcy and options to avoid bankruptcy.

A “preferential payment” is a payment that you make to a creditor that is in preference to your other creditors, meaning that you have given them substantially more than you have given the others. If you manage to pay all of your debts, a payment like this should not matter, however, if you were to go Bankrupt, though, or enter into a formal arrangement with your creditors known as a Personal Insolvency Agreement, any preferential payments would need to be investigated by your Trustee.

When you fill out the paperwork to declare yourself Bankrupt, you are asked to disclose if you have paid any creditor an amount more than $1,000 over and above your normal repayments, or surrendered any assets to them. Your Trustee in Bankruptcy must then review the last six months worth of bank statements for all bank accounts that you hold. From these they will be able to see if you have made any large payments to any creditors. They will then determine whether you were insolvent at the time, and if so, whether the creditor that received the large payment got more than they would have had you gone bankrupt and your available funds were spread out evenly amongst everyone. If so, the Trustee may then seek a court order to have that transaction reversed and the money would be distributed fairly to all creditors.

If you were to lodge a Personal Insolvency Agreement proposal your appointed Controlling Trustee would not “claw back” any of those payments like they would in a Bankruptcy. They do have to know about them though, because it is their job to recommend your offer to your creditors. To do this they need to determine what would happen if you were to declare Bankruptcy and compare this with your offer under the Personal Insolvency Agreement. The Controlling Trustee then sends a detailed report out to your creditors showing them that they would get more of their money back if they accepted your offer instead of making you go Bankrupt.

If you have any creditors demanding that you pay them more than your regular repayments, call our debt advice line on 1800 676 598. We can explain the terminology to you and give you advice on your options to deal with your unmanageable debt.

In our years of giving indebted Australians advice on their financial difficulties, we have learned that no person’s situation is quite the same as another. Not only is one’s debt level relative to every other aspect of their life, but there are different types of debt that people struggle with, and each come with their own solutions and restraints.

The most common type of debt that people struggle with is unsecured, meaning that there is nothing attached to the account that could be sold if you do not make the payments. Most credit cards, store cards and personal loans are unsecured. Unsecured debts also tend to have higher interest rates and, in the case of cards, are more likely to creep up on you because of how easy they are to keep using.

Many people also call us when they are having trouble paying their secured debts, such as a car loan or home mortgage. The main problem with these types of loans is that they are hard to negotiate with, as the secured creditor has the right to repossess the asset if you do not make your payments. Other problem debts such as fines and child support can be even harder to deal with, as they simply must be paid – not even Bankruptcy can wipe them out.

Depending on what sort of debt you have, it may be possible to become completely or relatively debt free by entering into a Debt Agreement. A Debt Agreement is a legally binding payment arrangement that encompasses all of your unsecured debts. It freezes the interest on those debts and reduces the amount that you pay toward them, and when you complete the Agreement (usually within a period of 3-5 years) you will be legally released from them. There are consequences to entering into a Debt Agreement, and you should discuss these with a reputable Debt Agreement Administrator before making the decision to go ahead with one.

If your debt is all unsecured and you successfully complete a Debt Agreement, you will come out of it “debt free”. If, however, you have any debts that are not covered by a Debt Agreement, such as secured loans and fines, you will not be completely debt free at the end, as these still need to be paid. You may find, though, that putting your unsecured debts into an affordable arrangement will make it easier for you to manage these other debts.

For more information on how to become free of unsecured debt, call one of our consultants today on 1800 676 598. We are fully licensed and qualified to administer a Debt Agreement for you, or, if you are not eligible for one, any of the other insolvency options that are available that will wipe out your unsecured debt. Our advice is impartial and obligation-free, so call us now.