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.