What is a Debt Agreement
A Debt Agreement is a legally binding agreement which allows you to negotiate a repayment plan with your creditors to repay unsecured debt over an extended period of time (usually between 3 to 5 years). If your Debt Agreement Proposal is accepted by your creditors the interest on their debts will be frozen.
A Debt Agreement does not deal with secured debts. If you wish to keep the assets subject to the secured loan you must keep paying the loan re-payments, otherwise the asset will be repossessed.
A Debt Agreement will provide you with the protection from bankruptcy. A Debt Agreement is also known a Part IX (9) Arrangement as it is managed under Part IX of the Bankruptcy Act.
With a Debt Agreement will you only have to repay what you can comfortably afford to repay after reasonable living costs are taken into account. We will help you establish what you can afford to repay and we will guide you as to whether we believe your creditors are likely to accept your Debt Agreement Proposal. Your creditors must accept your Debt Agreement Proposal for it to become legally binding (the acceptance level is at least 50% of your creditors measured by the value of their claims).
Who should enter into such an Agreement
Only people who have been struggling with unsecured debt should submit a Debt Agreement Proposal. Strict application and eligibility criteria apply and it is at the discretion of the Registered Debt Agreement Administrator as to whether they will submit your proposal to your creditors. As a guide, Debt Free Pty Ltd will not usually recommend a Debt Agreement Proposal for unsecured debts less than $8,000.
What are the benefits?
- You can consolidate your unsecured debts into one monthly payment
- Interest and charges are frozen
- Your creditors cannot continue contacting you
What are downsides?
You will be listed on the National Personal Insolvency Index (NPII) which is maintained by ITSA. The Debt Agreement will usually be listed on the commercial credit listings for 7 years.
Who should I appoint as my Administrator?
Whilst you can submit a Debt Agreement Proposal yourself, most people chose to appoint a Registered Debt Agreement Administrator. We strongly recommend that you only deal with a Registered Debt Agreement Administrator. You can check to see if the organisation you are dealing with is registered by contacting ITSA. Debt Free Pty Ltd is registered with ITSA.
Do I have to pay fees to my Administrator?
Most Debt Agreement Administrators will charges fees. The issue to be careful about is when should you start making payments to your Debt Agreement Administrator and how much should you pay.
Most Debt Agreement Administrators will charge a set up fee and will most likely ask that some of the set up fee be paid before the Debt Agreement Proposal is lodged with ITSA for processing.
Fees are usually spilt into 2 categories:
- set up fees; and
- administration fees.
Set up fees
Most administrators charge a set up fee. A set up fee is charged to remunerate the administrator for helping you prepare the Debt Agreement Proposal and lodging it with the Debt Agreement Service at ITSA. The set up fee may become payable before your administrator submits the proposal to ITSA for processing. Your Debt Agreement Administrator must also sign and lodge your proposal within 14 days of you signing it. Never return your Debt Agreement Proposal unsigned or undated.
Administration fees
Administrators will also charge an administration fee. The administration fee is charged as a percentage of the contributions that you make under the Debt Agreement. This fee can only be paid to the administrator after your Debt Agreement Proposal has been lodged with ITSA and has been accepted by your creditors.
What happens if I can’t make the payments under the Agreement?
If you fail to make the payments under your Debt Agreement, it will typically result in your agreement becoming terminated by your administrator or your creditors. If you are struggling to make the payments under your Debt Agreement, get in touch with your administrator immediately.
We have already helped hundreds of Australians set up Debt Agreements. We are a privately owned company and are focused on providing a personalised and professional service.