A Part 9 Debt Agreement a formal arrangement you make with your creditors to help repay your debt. It is one of the legal options available to those struggling to pay under Part IX of Bankruptcy Act 1966.
While a Part 9 Debt Agreement could help free you from debt, however, it has long-term consequences that may affect your ability to get loans. In this article, we discuss some of the basic details that would help potential borrowers understand what they are getting into.
Eligibility Criteria for a Part 9 Debt Agreement
Understand that you need to fulfil the following criteria to qualify for a debt agreement:
- You are insolvent, which means you cannot afford to repay your debt as and when it falls due.
- You were never bankrupt, entered a Deb Agreement, or granted authority under Part X of the Bankruptcy Act for the last ten (10) years.
- You are not under the limitations set by AFSA for unsecured assets, debts and after-tax income for the next 12 months.
What Types of Debt are Affected by a Part 9 Debt Agreement?
This agreement only affects provable unsecured debt and interest. Unsecured debt has no security attached to it, which means no collateral or asset is supporting it. Personal loans, bills, tax debts, and credit card debts are all examples of unsecured debt. Car loans and home loans are not unsecured debts because assets back them up.
How Does a Part 9 Debt Agreement Work?
Initially, you need to discuss with and convince your creditors to let you pay a percentage of your combined debt based on what you can afford. You must pay this off within an agreed period, and you need to pay regularly, either weekly, monthly, or fortnightly.
You place your payments to a debt agreement administrator instead of paying the creditor separately. The agreement ends once you are done with the payments. The creditors cannot attempt to retrieve the rest of the money you owe them.
Consequences of a Debt Agreement
Once you enter a Part 9 debt agreement, you can expect the following:
- It will reflect on the credit report for at least five years.
- You need to inform new credit providers about it if your debt is higher than the credit limit.
- They will list your name on the National Personal Insolvency Index for at least five years.
- There is a possibility that you will not be able to work in some professions.
Is Debt Agreement a Good Idea?
A Part 9 Debt Agreement is indeed an enticing option, especially when debt is becoming too hard to handle. Yet, given the consequences and conditions that come with it, it’s wise to not to jump right ahead and instead, review all your options first.
Consult with a financial advisor to discuss and see if this is a better option than filing for bankruptcy.
Unmanageable debt is a problem faced by many people in Australia. The stress it causes affects your wellbeing. It may lead to having default and judgements listed against you. In the worst cases, creditors can make you bankrupt.
It’s never too late to ask for help. An initial consultation will not affect your credit rating. Take the first step to financial freedom and consult Makes Cents today.