Debt Agreement
Debt Agreement
Find Out how
Here at Debt Free Australia we have a track record in helping Australians solve their debt problems with avoiding bankruptcy and successfully settling their unaffordable debt through a Debt Agreement.
To help you understand what is a Debt Agreement we have provided an outline of information below. Please take a few minutes to carefully explore your legal alternatives to bankruptcy.
Use Our Checklist To See If You Qualify For A Debt Agreement
Quick Guide – Do I qualify for a Debt Agreement?
You are considered insolvent (unable to pay your debts as and when they fall due); and
Have unsecured debts less than < $140,012; or
Have equity in assets less than < $280,025; or
Regularly employed & annual income is less than < $105,009 (after tax) or approximately < $147,715 (before tax for Australian residents)
To view current debt agreements thresholds, Click here
What Is A Debt Agreement?
Find out what a debt agreement is
A Debt Agreement is an agreement you can reach with your creditors if you can no longer afford to repay the debt. Only people who have been struggling with debt for some time can enter into a Debt Agreement. A Debt Agreement is basically an arrangement with your creditors to pay an agreed amount over a period of time (usually this ranges from 3 to 5 years). In most cases you can settle your debts for less than what is owed and the balance will be legally written off.
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A Debt Agreement Proposal can be put to your creditors. Given it is a formal agreement with your creditors it must be approved by them. it is also common practice that a Debt Agreement is supervised by a registered Debt Agreement Administrator. Many people think that because it is set up pursuant to the bankruptcy Act, it is bankruptcy, but it should never be confused as bankruptcy. A Debt Agreement is a legal alternative to bankruptcy.
How Do I Set Up A Debt Agreement?
Find out how
To set up a Debt Agreement, it is necessary that you select a Registered Debt Agreement Administrator (RDAA). A Registered Debt Agreement Administrator is usually a person who has a minimum level of accountancy qualifications and relevant experience in the industry.
The Debt Agreement Proposal will contain a summary of your financial affairs and also contain your proposal to settle your debts. The RDAA must certify that the proposal is sustainable and affordable. After the proposal has been lodged with AFSA, AFSA will then circulate the proposal to your creditors and they will have 20 working days to vote on it. For the proposal to be accepted, creditors holding 50% in value of the debt must approve it. So for example if you have $100,000 in debt, creditors holding $50,000 must approve it.
If you meet this voting criteria then all other creditors (whether they voted or not) will be bound by the Debt Agreement.
In Our Experience, Creditors Often Request 60 Cents In The Dollar
What Will Creditors Accept?
What do they accept?
In our experience, most creditors want to receive at least 60 cents in the dollar. So if you owe $100,000 in debt, the creditors want to receive at least $60,000 (after costs and charges of administering the Debt Agreement).
Why Would I Go To The Trouble Of Proposing A Formal Debt Agreement?
Find out why
There are many benefits to proposing a Debt Agreement (particularly if you compare these benefits to bankruptcy). These benefits are briefly listed below:
- Interest on your debts will be frozen at the time your agreement is accepted by your creditors but it can be reinstated if you default on your agreement and it is terminated
- You only pay back what you can afford to repay (and the balance of the debt will be written off)
- All creditor enquiries will be handled by us (so you won’t be hassled by your creditors)
- Once your agreement is accepted your assets will be protected from most enforcement action (whereas in bankruptcy most assets will be sold)
- Your ability to travel will be unrestricted (whereas in bankruptcy you would need your Trustee’s permission first)
- You won’t be subject to a yearly assessment of your income (whereas in bankruptcy you will be, and you would need to pay compulsory income contributions if your assessed income in the contribution assessment period went over the statutory thresholds)
What Debts Go Into A Debt Agreement?
What do they accept?
Only unsecured debts can go into a debt agreement, so typically they would include credit cards, personal loans, store cards or any shortfall on an old secured debt.
Secured debts cannot go into a Debt Agreement. So if you have a secured debt, like a car loan or a house loan, then these debts will need to be paid outside of the Debt Agreement. If you have sold the asset which was subject to the security of the secured debt, then any shortfall can be included in the Debt Agreement.
DID YOU KNOW:
SECURED DEBTS CANNOT GO INTO A DEBT AGREEMENT
How Is It Different To Bankruptcy?
How is it different
Firstly a Debt Agreement should not be confused with full blown bankruptcy, because it is not bankruptcy. A Debt Agreement is a legal alternative to bankruptcy. It is a far more flexible arrangement with your creditors and it is an agreement where you have agreed to pay a certain sum of money over time.
This money will be used to repay your debts (after administration costs and expenses). If the amount paid into your Debt Agreement is less than what you currently owe, then the balance of the debt will be written off (after you successfully complete your agreement).
Are There Any Consequences Of Proposing
Or Entering Into A Debt Agreement?
Are there any consequences?
Some examples of the consequences of entering into a Debt Agreement are listed below:
- The Debt Agreement will be listed on your credit file for a minimum of 5 years (unless if the agreement runs longer than 5 years).
- Your name will be published on the National Personal Insolvency Index (which is maintained by AFSA)
Click here to view a full list of consequences of entering into a Debt Agreement.
If you are unclear about these consequences please call our toll free line and we will explain them to you.
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Who Should I Deal With And Trust To Set Up A Debt Agreement?
Who is the right person?
You should only deal with a Registered Debt Agreement Administrator (RDAA).
Here at Debt Free Australia, we have a Registered Debt Agreement Administrator and we can help you set up a Debt Agreement. In fact, we won’t charge you any money at all until we have fully qualified you as being eligible for a Debt Agreement.
To qualify you we offer a free financial assessment.
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