Debt Agreement

Have you got between $8,000 and $108,162.60 in unaffordable debt and need to find a solution?

We can help you combine all unsecured debt into a formal repayment arrangement (subject to strict criteria and creditor approval).

Call us today to see you qualify.

Debt Agreement Video Library

Debt Agreement criteria:

  • You are considered insolvent (unable to pay your debts as and when they fall due); and
  • Have unsecured debts less than < $108,162.60 ; and
  • Have equity in assets less than < $108,162.60; and
  • Regularly employed but annual income is less than
    < $81,121.95 or approximately < $113,304 (before tax for Australian residents)is a debt relief solution for people who are struggling with personal debt. It is a legally binding repayment plan between you and your creditors and will be based on what you can afford to repay. It may help you avoid bankruptcy.

The benefits of a Debt Agreement (herein after referred to as a “DA”) include:

  • Affordable regular payments tailored to your budget;
  • Unpaid debt will be legally written off (including interest);
  • Binds all creditors into the agreement
  • Fixed payment period usually from 3 to 5 years
  • We deal with all creditor calls and correspondence;
  • Avoids the stigma of formal bankruptcy – allowing you to enjoy the following benefits:
    • Freedom to travel overseas
    • Assets will be protected

A DA is ideal for insolvent debtors who have a poor credit record and cannot obtain a consolidation loan. A DA is a formal legally binding agreement with your creditors and is an act of bankruptcy under the Bankruptcy Act. As such it should not be confused as a consolidation loan.

Read our Frequently Asked Questions about a Debt Agreement.

Remember our advice is free and without obligation, so call us today toll free on 1800 98 10 70, you have nothing to lose!

What is a Debt Agreement?

A DA is a legally binding agreement with your creditors which must first be approved by them. Usually you pay an agreed regular sum for a period of 3 to 5 years and the interest on your debts is frozen at the time your agreement is accepted by your creditors. Your contributions are divided up between your creditors (less our fee which is approved by your creditors), who accept the sum in full and final settlement of the amount you owe them. In many cases this will be less than the total amount you currently owe and any difference will be written off. If you own your home or other assets you may choose to sell them or re-mortgage these assets and pay one lump sum in full and final settlement under your debt agreement.

Once your DA has been approved by your creditors, it will protect you against any further legal action which they may have been entitled to take against you, which may have resulted in your Bankruptcy.

So how much will I be required to pay under a Debt Agreement?

The regular payment you will make under your DA will depend on your income and expenditure. We will help you assess what you can comfortably afford to repay towards your DA. We will usually request that a direct debitl be set up to collect your agreed contribution under the DA.

What sorts of people enter into Debt Agreements?

A DA is suitable for anyone who has unsecured debts which they cannot repay as the debts fell due for payment. If you cannot pay your debts as they fall due, you are insolvent and the law gives you two alternatives – Bankruptcy or a DA. You cannot propose a DA if:

  • you have been a Bankrupt or entered a DA within the last 10 years; or
  • your unsecured debts exceed $$108,162.60; or
  • your assets that would be available under bankruptcy exceed $$108,162.60; or
  • your income for the next 12 months is expected to exceed $81,121.95 (after tax) or approximately $113,304 before tax for Australian residents).

Are there any other options?

You can approach your creditors individually and ask them to reschedule your debts, but this may be difficult if you have a lot of creditors. Some banks and building societies have hardship assistance and we recommend that you approach them in the first instance before proposing a DA.

Bear in mind that unlike a DA, an informal arrangement offers no guarantees as one or more of your creditors could change their mind at a later date, or charge you higher rates of interest later.

What are the advantages of a Debt Agreement?

  • We help you to calculate what you can afford to repay and you make just one payment into your Administrators’ DA account by a regular direct debit.
  • Once your DA is approved, all of your creditors are legally bound by its terms, so as long as you keep paying your agreed sums you will be protected from any creditor enforcement action.
  • Once the agreed term of your Debt Agreement is over (usually after 3 to 5 years) you will have no further obligations to your creditors. At this point you stop paying the regular sum, and can start afresh.
  • Your employment will probably not be affected. In fact, your employers will not know about your DA unless you choose to tell them.

How to do apply for a Debt Agreement?

The first step is to call us on our toll free advice line or to apply on-line. We will take you through our Best Advice Model and will then advise you on the solution which best suits your financial circumstances. We recommend many solutions so we do not sell a DA to every caller! We will always give you free and impartial advice. After you have supplied us with all of the necessary information we will prepare your Debt Agreement Proposal for you. After you have signed your Debt Agreement Proposal we will lodge it with the Insolvency and Trustee Service Australia who will send it to your creditors for voting.

Your creditors will vote on your Debt Agreement Proposal by mail and you will not need to attend any meetings of creditors or speak to your creditors about the proposal. We will handle all negotiations with your creditors.

Will a Debt Agreement affect my credit rating?

Your Debt Agreement Proposal will be recorded on the National Personal Insolvency Index register (forever). This register is maintained by the Insolvency and Trustee Service Australia. Your name will also be recorded on a commercial credit reference database for 7 years, after which time it will be deleted. Your credit is likely to be effected after entering into a DA or you may be charged a higher rate of interest.

What else should I know before I apply for a Debt Agreement?

You might actually pay more under a DA compared to if you were made Bankrupt. This is because you may not need to make income contributions if you were made bankrupt. To enquire if you would be liable to make compulsory income contributions please complete the information on the Bankruptcy Income Calculator.

Will my home be safe in a Debt Agreement?

You will not usually have to sell your property if your creditors accept your Debt Agreement Proposal (but you may need to release some equity in the property). If you choose to keep your house, you will of course need to keep your mortgage repayments up to date. Your house mortgage stands outside your DA. If you were made bankrupt your Bankruptcy Trustee would need to take steps to sell the equity in the property, whether that be to your spouse or a third party.

What if my creditors don’t accept my proposal?

At least 50% of votes (in value) must be in favour of your Debt Agreement proposal.

If your creditors don’t vote in favour of your Debt Agreement Proposal you will still have the option of negotiating an informal arrangement with your creditors.

Who is Debt Free regulated by?

Our Debt Agreement Administrator is a qualified Chartered Accountant and is a member of the Institute of Chartered Accountants in Australia and the Insolvency Practitioners Association of Australia. The Insolvency and Trustee Service Australia also regularly inspects our operations to ensure strict compliance with the bankruptcy Act.

Debt Free helped some Australians : read our Debt Agreement case studies