If you are looking at your options to get out of debt, one solution that you may have come across is a Debt Agreement.
A Debt Agreement may be governed under the Bankruptcy Act but it is important to know what it is not Bankruptcy but an alternative to Bankruptcy. It refers to a formal agreement between the debtor and creditors. This agreement stipulates an agreed payment plan to ensure that Debts are repaid, and usually, you can settle your debts for less than what is owed. A Debt Agreement will usually last for 3 to 5 years. After it ends, the balance will be legally written off.
There are many advantages of a Debt Agreement. For example, the interest of on the debt will be frozen, you will not be restricted to travel, you will only pay back what you can afford, and you won’t be hassled by your creditors.
In order to be eligible for a Debt Agreement, you need to meet certain requirements.
Debt Agreement Checklist:
- You are insolvent meaning that you are unable to pay debts as and when they fall due; and
- Your unsecured debts and income fall below the thresholds, click here to see the current thresholds.
If you meet the requirements and wish to set up a Debt Agreement, you must choose a Registered Debt Agreement Administrator (RDAA). Your RDAA will then confirm that your proposed Debt Agreement is sustainable and will prepare and lodge the application with Australian Financial Security Authority (AFSA). They will then pass on the proposal to your creditors who have 20 days to come to a vote on it. In order for your proposal to be accepted, creditors holding 50% of the value of the debt must approve it.
If they do, then every creditor, whether they voted or approved it, will be bound by the terms and conditions of the agreement.
If you would like to learn more about a Debt Agreement or get expert advice on whether it is the appropriate debt relief solution for you, then please contact Debt Free Australia. Our toll-free hotline is open 24/7 so our friendly and professional Debt consultants will always be available to help. Call us on 1800 676 598.