How a Debt Agreement can be an alternative to filing for bankruptcy

The COVID-19 pandemic over the past 2 years has put a lot of strain on many people’s ability to satisfy their financial commitments, leading to bankruptcy and personal insolvency. It doesn’t have to be that way, however since a debt agreement might be a viable alternative to bankruptcy.

Debt agreements are legally enforceable agreements between a debtor and their creditors that give debtors a flexible approach to paying their debts without having to file for bankruptcy. Repayments are made to a debt agreement administrator rather than to the creditor directly, which makes repayments more manageable, especially when numerous creditors are involved. After the agreed-upon payments are made, creditors can’t go after the debtor for any more money.

While a debt agreement isn’t the same as declaring bankruptcy, it can have a negative impact on your credit score. It is necessary to get professional advice. The length of time it takes to pay off a debt arrangement depends on whether you own assets like a house. However, once the agreement is signed, all interest charges from unsecured creditors stop for the duration of the agreement.

Debtors must fulfil certain conditions to be eligible for a debt settlement, including:

  • You are insolvent and cannot afford to repay your debts.
  • You have not been declared bankrupt or entered into a debt agreement within the last 10 years.
  • You meet the limit on how much debt you can have and what kind of debt you can have. Please note that fines do not qualify for a debt settlement.
  • You must meet AFSA standards for unsecured debts, assets, and after-tax income for the next 12 months.

If you are looking for advice personally tailored to your situation about Debt Agreements, then please contact Debt Free Australia. DFA are passionate about helping Australians get out of debt and prepare for a better financial future. Please contact us on our 24/7 toll-free hotline on 1800 676 598 to speak to one of our friendly and professional debt relief consultants.