Agreements

Debt Agreements

Part IX/9 of the Bankruptcy Act

A Debt Agreement (Part IX/9 of the Bankruptcy Act) is a legally binding agreement between you and your creditors where you negotiate to repay a percentage of your unsecured debt back, and generally over a 3-5 year period.

Your provable unsecured creditors will vote on your proposal and you will need more than 50% of them to agree in order for your proposal to be accepted.

Who'll manage it?

Most people appoint a registered trustee or a registered debt agreement administrator because despite what you may have heard, this type of proposal can be complex. The process involves many steps and a high degree of experience and skill is needed in order to set it up and further administer it.

What does it cost?

There are various fees involved when it comes to debt agreements and they often vary between administrators and trustees.

Typically you will be charged:

  1. A set-up fee by the administrator or trustee – this fee relates to the cost of putting your proposal together
  2. AFSA lodgement fee – a fee that the Federal government charge for lodging your proposal
  3. Administration Fee – a fee that your trustee or debt agreement administrator will charge for administering your agreement if, and once it’s accepted by your creditors
  4. AFSA Realisations Charge – a levy which is charged by the Federal government if and when your proposal is accepted and it relates to the cost of conducting enquiries, investigations, monitoring and the regulation of trustees and debt agreement administrators

What are the consequences?

A Debt agreement is still an act of bankruptcy, so just like bankruptcy and personal insolvency agreements there will be a listing on your credit report for 5 years. The government will also keep a record of your debt agreement on the National Personal Insolvency Index (NPII).

If you’re self-employed and trade under a business name that’s not your personal name, you’ll need to disclose your debt agreement to all people you do business with. You’re also unable to apply for goods or services on credit, cheque or hire purchase above a set amount without disclosing that you are currently in a debt agreement.

By committing an act of bankruptcy, a creditor can apply to the court to make you bankrupt if your Debt Agreement fails.

Am I eligible?

You’re eligible to propose a Debt Agreement if:

  1. Your after-tax income doesn’t exceed a certain amount.
  2. Your unsecured debts and assets don’t exceed a certain amount.
  3. You haven’t been undischarged from bankruptcy, a personal insolvency agreement (Part X/10) or a debt agreement (Part IX/9) in the last 10 years
  4. You are insolvent, that is; you’re unable to pay your debts as and when they fall due
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