When you are struggling underneath a mountain of debt, it can often seem like there is no end in sight. Luckily, it doesn’t have to be that way. If you have more debt than you can handle, a debt agreement may be the way for you to extract yourself.
A debt agreement is an arrangement that you make with your creditors to repay your unsecured debt (credit cards, personal loans, disconnected utilities, pay day loans etc) without needing to resort to bankruptcy. You determine what you can afford to pay, then present a proposal to your creditors. If they agree to the proposal, the debt agreement begins and you continue to make repayments. Many creditors prefer this method to bankruptcy as it still allows them to receive some amount of repayment, even if it is not the full amount of your debt.
It is important to note that there are fees involved in processing Debt Agreements, these include an administration fee as well as an application fee inclusive of a government lodgement fee. However these fees are factored into your contractual payments and not required upfront. A Debt Agreement will be listed on your Credit File for a minimum of 5 years, once you have completed all obligations as set out in the Debt Agreement and it has been 5 years since your name was listed on the National Personal insolvency Index, the default will be removed. You will not be able to obtain any credit for the duration of the Debt Agreement, but you may apply for credit once you have completed your obligations at the lenders discretion.
A Registered Debt Agreement Administrator is the best option when considering entering into a Part IX Debt Agreement. They often offer a range of services based on a client’s financial situation, they will also be able to appropriately determine if a Debt Agreement is the right option for the client.
A debt agreement ends when you have made all repayments as specified in the original agreement and your creditors have closed your account files. The term of the agreement varies depending on the specific terms you have set out but can be anywhere between 3 and 7 years. At the end of the agreement period, a debt agreement will be removed from your Credit File, once you have completed all obligations and it has been a minimum of 5 years since your name was entered onto the National Personal Insolvency Index (NPII)