Here at Debt Free Australia we frequently receive questions from people who are struggling with their debts and want to explore if there are any alternatives to formal bankruptcy. In this article we explore the differences between a Debt Agreement and Bankruptcy.  Hopefully we will clearly explain how a Debt Agreement is a genuine alternative to bankruptcy.
 How is a Debt Agreement an alternative to Bankruptcy?
Simply put, a Debt Agreement is an alternative way to deal with your unsecured debts. Like Bankruptcy, a Debt Agreement is governed by the same Federal legislation (the Bankruptcy Act 1966), however it brings less severe consequences compared to a full blown bankruptcy.
So what are the consequences of a Debt Agreement?
Simply put the consequences can be summarised as follows:

• Proposing a Debt Agreement is an Act of Bankruptcy;
• Will be recorded on your credit file for a minimum of 5 years (unless if the agreement runs longer than 5 years).

Why is proposing a Debt Agreement an Act of Bankruptcy?
An Act of Bankruptcy is not to be confused with a full blown Bankruptcy. It simply means that if you fail to comply with the terms of your Debt Agreement, or if your creditors fail to accept your proposal, they can then rely on  that “event” to petition to the court to make you bankrupt.  But remember, you cannot be made bankrupt without a court order. i In other words, if you commit an act of bankruptcy, you do not automatically become bankrupt.
If you are looking for financial relief (i.e. as most do not repay 100% of the debt through a Debt Agreement) the Government legislators felt that there must be consequences of proposing and entering into a Debt Agreement. AFSA has prepared an information sheet on the consequences of entering into a Debt Agreement.
How will my credit rating be affected under a Debt Agreement?
A Debt Agreement will be recorded on your credit file for a minimum of 5 years (unless if the agreement runs longer than 5 years).  It will also be recorded on the National Personal Insolvency Index (NPII) for life which is a public record.
If you attempt to obtain a loan during this time, lenders will know that you have previously entered into a Debt Agreement. That being said, a Debt Agreement will most likely be viewed more favourably than Bankruptcy, as it shows that you attempted to repay as much as you could despite the fact that you were insolvent.
What benefits will I enjoy in a Debt Agreement compared to Bankruptcy?

• No Travel Restrictions – In Bankruptcy you must request permission to travel overseas and often you will need to show where the monies to fund your trip has come from.  Compared to a Debt Agreement, there is no restriction at all under a Debt Agreement.

• No Yearly assessment of income & compulsory contributions – In Bankruptcy, your trustee will need to conduct an annual assessment of your income to see if you have become liable for compulsory income contributions. There is no such requirement under a Debt Agreement, so if you get a higher paid job after entering into your debt agreement, you will be able to save more money!

• No automatic loss of assets – When you declare Bankruptcy, your trustee will make an assessment as to what assets you can keep and what assets you will need to surrender. Furthermore, whilst you are bankrupt, you cannot purchase any asset. In a Debt Agreement, you get to keep all of your assets.

Should I propose a Debt Agreement or Bankruptcy?
Ultimately, the best course of action will depend on your specific circumstances and for that reason we offer a free debt assessment.  You may commence this assessment by providing some basic details on-line.  For a full assessment call the team at Debt Free Australia.  Our staff are fully trained and can advise you on your best options.
Call us today on 1800 462 767. We offer a 24 hour / 7 days a week advice line.

Bankruptcy Meetings

Bankruptcy Meetings are usually called by the Trustee in Bankruptcy who administers the bankrupt estate. The Bankruptcy Act stipulates very strict rules and procedures for meetings of creditors. A bankruptcy meeting will be chaired by a meeting president (the person who runs and controls the meeting) and the dialogue at the meeting will be recorded by a minute secretary. The minutes secretary will prepare and sign minutes of the meeting. Both the meeting president and the minutes secretary need to be appointed by the creditors. Usually the Trustee in Bankruptcy is appointed as the meeting president, however, creditors can appoint an independent person to act as the meeting president.

Why are Meetings of Creditors held?

Meetings are usually held for more complex bankrupt estates. A Trustee in Bankruptcy may call a meeting of creditors to discuss the progress of the estate and to have creditors consider and pass any necessary resolutions. For example, if a Trustee in Bankruptcy was considering to commence complex litigation, the Trustee in Bankruptcy may consider calling a meeting of creditors to obtain the views of creditors. It is important to note however, that whilst the Trustee in Bankruptcy will in most cases consider the views of creditors, the Trustee does not need to follow the decision of creditors.

Can a creditor call a meeting of creditors?

If a creditor either individually or collectively wishes to call a meeting of creditors and have 25% of the total claims then they can request that the Trustee in Bankruptcy call the meeting. If any creditor who hold less than 25% of the votes wish to call a meeting of creditors then they will need to pay the trustee for the cost of holding the meeting (Section 64(1) of the Bankruptcy Act).
At Debt Free Australia we offer a 24 hour / 7 days a week advice line. Call us now on 1800 462 767 for in-depth advice on bankruptcy and how it might affect you.
All calls are free, entirely confidential and if required, anonymous.

Debt Free Australia is the best company to contact to help you with business debt. At Debt Free Australia, we know that every case is different and we will take the time to find the best solution to help solve your business debt.
Our team of friendly debt advisors will personally work with you to ensure that you fully understand all of your options. Deciphering between personal debt and business debt can be complicated and professional skill and knowledge is required.  Here at Debt Free Australia our debt advisors have been professionally trained to help people identify the differences between business debt and personal debt.
If you have become personally liable for business debt and you also have personal debt which you can no longer afford to repay, then you should consider our debt solutions.  Our debt solutions range from personal bankruptcy but also include options to avoid personal bankruptcy like a Debt Agreement  or a Personal Insolvency Agreement.
If you feel you need help with your business debt, then call our professional debt advisors on 1800 462 767 for free and impartial advice.

Amidst all the stress and confusion of trying to find a solution for your debt problems, it can sometimes be hard to figure out exactly what you are being offered, and whether or not it is the right solution for you. This is especially true when you are being offered advice from a number of different sources, some of which might not be able to offer you all of the products that are available to you.
A Personal Insolvency Agreement  is often seen to be the same as, or practically indistinguishable from, Bankruptcy.  Both a Bankruptcy and a Personal Insolvency Agreement will place a mark on your credit file.  Bankruptcy will be listed on your credit file for a period of (7) seven years, whereas a Personal Insolvency Agreement will only be listed on your credit file for five years (unless your agreement runs for a longer period of time). Apart from that there are other important differences between a Personal Insolvency Agreement and Bankruptcy, and it is these differences that will help you to decide whether or not it is the right option for you.
The main difference between a Personal Insolvency Agreement and Bankruptcy is that under a Personal Insolvency Agreement you do not have to worry about losing your home as it will be protected. Whereas Bankruptcy works by selling your assets to pay your debts, a Personal Insolvency Agreement is instead a legally binding payment arrangement (usually over a period of time). So as long as you adhere to the terms of the Personal Insolvency Agreement, you will not have to worry that your Trustee will try to have your home sold.
Another important difference is the fact that you are free to travel overseas if you are in a Personal Insolvency Agreement. This factor is extremely important for those people who are required to travel for their employment or just like to travel overseas for holidayss. Other differences include less severe restrictions if you wish to apply for  more credit, which can be advantageous for the self-employed, and different rules when it comes to the running of one’s business whilst under an arrangement.
Most people wish to avoid bankruptcy because of the stigma or a sense of responsibility to repay their debts, but for a lot of people it is essential that they avoid the harsh restrictions  placed on them by bankruptcy. To know if a Personal Insolvency Agreement is right for you consult with an expert who can properly advise you and who is fully licenced to provide the solution. Don’t deal with a company who will later refer your case to a Trustee in Bankruptcy after you have paid them a set-up fee. Here at Debt Free Australia our CEO is a Trustee in Bankruptcy so we can help you from the beginning with setting up a Personal Insolvency Agreement or Bankruptcy. We will carefully explain the differences between the two solutions and will let you decide after you have become fully informed. Call us today on 1800 462 767 for impartial and obligation-free advice.

What is a Debt Agreement?
A Debt Agreement is a formal arrangement that you can enter into with your creditors that will allow you to settle your debts with a legally binding payment plan. It effectively freezes your debt at the level it is at now, meaning that no more interest or charges are added, and you will offer your creditors a percentage of what is owed over a period of time (usually 3-5 years). As you can imagine, people would be offering Debt Agreements all the time if there were no negative consequences, and for that reason they are designed to ensure that the only people proposing them are those who really need to.
What are the cons of a Debt Agreement?
When you lodge a Debt Agreement Proposal for your creditors’ consideration, there will automatically be a record kept of this in two places. One of them is the National Personal Insolvency Index , which is a government register designed to keep track of who has sought the assistance of a formal debt solution. This record is permanent, but one also has to pay a fee to search the database, so you will find that it is usually only accessed in extenuating circumstances.
The record that concerns most people is their credit file, which will have a mark on it for 5 years from the time that you lodge your Debt Agreement Proposal (assuming your agreement doesn’t run for longer than 5 years). What this means is that whilst you are in your Debt Agreement you will not be able to gain credit, and for the few years after you come out of it you might find it a little more difficult than before. It will always be up to the individual finance company as to how they react to the fact that you have entered into a Debt Agreement when they assess your application for credit.
What are the pros of a Debt Agreement?
A Debt Agreement has many positive aspects to it, however, and for some people these pros will outweigh the cons. After you have completed your Debt Agreement you will be legally released from the debts which you owed at the time you lodged your Debt Agreement Proposal. Many people find that a Debt Agreement helps them control their money and spending habits as the Debt Agreement is based on a strict budget.  Many of our clients have told us that they have even been able to save money whilst also paying off the debt included in the Debt Agreement.
Five years may seem like a long time to have a mark on your credit file, but if you consider how long it would take you to pay back your unsecured debt if you kept going the way that you are, you might actually find that the trade-off is worth it. And if you are truly insolvent and unable to pay your debts as they fall due, whilst still maintaining a comfortable standard of living, it is likely that your situation with credit is going to continue to worsen.  In many cases people find that their credit file already has marks recorded against it, so in this sense a Debt Agreement being recorded against it isn’t going to make it much worse. It is for these people that a Debt Agreement is designed, those for whom the positive aspects are going to make the negative worthwhile. Speaking to a reputable Debt Agreement Administrator will help you to determine whether or not a Debt Agreement might improve your overall financial situation and quality of life.

If you have received a local or district court judgment for a debt which is more than $5,000, then it is possible that the creditor chasing you for payment will then apply to the Official Receiver at AFSA for a bankruptcy notice to be issued against you.
What is a bankruptcy notice?
A bankruptcy notice is a formal notice issued under the Bankruptcy Act, and if you ignore the notice, the creditor will be able to apply to court for a sequestration order (i.e. a bankruptcy order) to be made against you. This application to court is also known as a Creditors’ Petition. Once a Creditors’ Petition has been filed in court it will allocate a hearing date.  If the debt remains unpaid at the time of the hearing it will issue a sequestration order and you will be declared bankrupt by the court.
What can I do if I have been served with a bankruptcy notice?
You may be able to stop a creditor from forcing you into Bankruptcy by proposing a Debt Agreement or a Personal Insolvency Agreement.  If you would like to learn more about your options call us now.  Don’t delay if you want to avoid bankruptcy.
Our hotline is open 24 hours a day and will be answered by an experienced debt consultant.  Call us now on 1800 462 767.

A Debt Agreement is a type of formal arrangement that allows debtors who have unmanageable unsecured debts to repay the creditors a portion of their unsecured debts back. If you are not able to repay your debt, and have not been able to for some time, then you may be eligible for a Debt Agreement.
When deciding the debt agreement offer, it is important to be realistic about your current situation, to ensure you are able to repay the debt each month. You must also consider what will happen if your circumstances change, and how much you can definitely afford to pay.
You are eligible to lodge a debt agreement proposal if:

• you are unable to pay your unsecured debts when they are due;
• you have not been bankrupt or been a party to a debt agreement as a debtor in the past 10 years;
• the level of all your unsecured debts must be less than $103,121.20;
• the level  of all your assets are less than $103,121.20;
• your net income after tax is less than $77,340.90; and that
• you are regularly employed

Once you decide that a debt agreement is the right option for your situation, you must appoint an administrator, who will provide you with all relevant information. The administrator will help you to work on a debt agreement proposal that will consider what you are able to pay back to your creditors considering your current circumstances. They will also assist in filling out all necessary forms:

• debt agreement proposal – outlining what sort of offer you will be making to your creditors
• explanatory statement – informs your creditors your income, household budget, assets, debts, and reasons for your financial difficulty
• statement of affairs – listing out your personal details such as source of income, any assets you have, along with a list of all your debts.

There are many benefits of a debt agreement compared to bankruptcy, and debt agreements are also becoming a more popular alternative.  Benefits of proposing a Debt Agreement includes the following:

• The interest accruing on your debt will be frozen
• The administrator will handle all communication with creditors
• You only need to pay one regular repayment, instead of multiple payments towards all your debts
• Once the agreement is accepted, you assets will be protected from most enforcement action
• There is no restriction in travelling.

Once it is ready, your administrator will lodge the Debt Agreement to the Australian Financial Security Authority (“AFSA”) accompanied by the debt agreement lodgement fee (at the time of writing, the lodgement fee is $200). AFSA is a government body responsible for administering and regulating the personal insolvency system such as bankruptcies, debt agreements, and personal insolvency agreements.
Once accepted and approved by the Official Receiver, your debt agreement proposal will be sent to your creditors to be voted on. The voting period is generally around four to five weeks.
For a proposal to be accepted, creditors holding 50% in value of the debt must approve it.
If your debt agreement is accepted by your creditors, you must comply with the terms of the agreement and ensure that it will be completed by the completion date listed on the proposal.
 
The agreement ends when you have completed all payments, and fulfilled all of the obligations outlined. At that point, you will be free from all debts that have been included in the debt agreement.

What are the consequences of proposing a PIA?
Before deciding to propose a Personal Insolvency Agreement (PIA), it is important that you also understand the consequences of entering into one.
Firstly, by appointing a Controlling Trustee, you will commit an Act of Bankruptcy. So if your proposal for a PIA is not accepted by your creditors, they can then apply to court and have you made bankrupt. However, any existing creditor’s petition cannot proceed until the meeting of your creditors has been held and your PIA proposal has been voted on. During the Controlling Trustee period (which lasts for 25 business days) your assets are under the control of your trustee and you cannot deal with them). Read more about what a Controlling Trustee does here.
If your creditors accept your PIA proposal, you will not be able to manage a corporation or act as a company director for the term of your PIA.
A PIA will also be recorded on your credit file for the term of your PIA (ie if your PIA last for 3 years then it will remain on your credit file for 3 years). Unfortunately, it will be recorded on the National Personal Insolvency Index forever but most credit providers only search your credit file.
Debt Free Australia is Australia’s premier provider of Personal Insolvency Agreements. If you would like to talk to someone about setting up a PIA, call us today on 1800 462 767. The telephone call is free and our advice is without obligation.

For many people, being insolvent has no impact on their employment whatsoever. If you are an employee, ie you are not running your own business, and you do not need to a trade or professional license to do your job, there should be no reason why your employment should be affected by an act of bankruptcy. But we always recommend that you read your employment contract thoroughly and, if in doubt, contact your HR department.
Things can become a little more difficult when you are working for yourself. The first and most obvious problem is that if you commit an act of bankruptcy you will have a default on your credit file, which will affect your ability to get supplies on credit. If you are bankrupt or in a debt agreement it is important to note that is an offence to gain credit over a certain amount without disclosing that fact.
Professions that require a license can also be affected by an act of bankruptcy. Whilst the Bankruptcy Act itself does not impose any restrictions, your particular licensing authority may have restrictions that it places on people who have gone bankrupt or entered into an arrangement under the Act. If your profession is listed here and you are considering declaring yourself bankrupt, you should contact the relevant authority to find out if your license will be affected.
And most importantly, if you are the director of a corporation, you will be automatically disqualified if you declare bankruptcy or enter into a Personal Insolvency Agreement. You would have to entrust the directorship to someone else for the duration of your arrangement, and ensure that you comply with all of the terms so that you can be re-appointed once it has been completed.
It is important to note, however, that each act of bankruptcy carries with it different consequences and so, depending on what it is that you enter into, you may still be able to carry on your business relatively free of side-effects. For example, if travelling overseas is a requirement for you, this would be affected by bankruptcy, but not by a Debt Agreement or Personal Insolvency Agreement. Restrictions on running a business as a sole-trader and applying for more credit apply to both a Debt Agreement and a Bankruptcy, but there are no similar restrictions if you enter into a Personal Insolvency Agreement. And whilst you would have to step down as director under a Bankruptcy or Personal Insolvency Agreement, you would be able to remain in your position were you to do a Debt Agreement. Given the different rules which apply to the different solutions, careful thought and planning needs to be given before you enter into any arrangement. (read of comparison of debt solutions here)
If you are concerned that your employment might be affected by an act of bankruptcy it is essential that you seek immediate professional advice. The factors that will affect the path you choose to take are numerous, and making the wrong choice could impact your livelihood tremendously. The team at Debt Free Australia are trained in all areas of personal insolvency, and can help you to find the solution that will have as minimal an impact on your employment as possible. Call us today on 1800 462 767.

Filing for bankruptcy should always be considered as the last resort if you are overwhelmed with unsecured debt. Before making a potentially life changing decision, we will carefully go through all of your options to see if you can avoid bankruptcy.  The options we will explore include:

•  Negotiating an informal arrangement with your unsecured creditors;
• entering into a formal Debt Agreement (Part IX) or;
• entering into a formal Personal Insolvency Agreement (Part X).

Informal Arrangements
An informal debt arrangement can be negotiated directly between you and your creditors to manage your unsecured debt. These arrangements might include, for example, a suspension of repayments for a period of time, or agreed regular installments.
The only drawback to this arrangement is that the agreement is not legally binding on your creditors, which means they can change their mind if you do not keep up with your promised repayments.  Typically this can then lead to creditors adopting a more aggressive approach which may include bankruptcy proceedings.
Informal arrangements can be negotiated with or without the assistance of an Insolvency Practitioner.
 
Part IX Debt Agreement
A Debt Agreement is a legally binding arrangement negotiated between you and your creditors usually with the assistance of a Debt Agreement Administrator. This arrangement will often take the form of an agreed sum paid in installments (usually over three to five years). The interest on your debts will be frozen at the time you lodge your proposal with AFSA.
Entering into a formal debt agreement means that you will be protected from any creditors who may have threatened bankruptcy proceedings.
You need to be aware of the consequences of proposing or entering into a Debt Agreement and these are explained in our related article.
Click here to read more.
Part X Personal Insolvency Agreement
If your debt exceeds the Debt Agreement Thresholds but you wish to deal with your debt by way of a formal agreement with your creditors, you may wish to enter into a Personal Insolvency Agreement (PIA).
A PIA works in much the same way as a Debt Agreement, ie it must first be approved by your creditors. The key difference is that entering into a PIA requires you to appoint a Controlling Trustee to take control of your assets and report your proposal to creditors and hold a meeting of your creditors. For this reason, a PIA usually costs more than a Debt Agreement.
If you want to explore your options on how to legally avoid bankruptcy, then call us today on 1800 462 767 for free and impartial advice.