Case Study on Debt Agreements

Debt Agreements can be a life saver at times and can work wonders for people who are insolvent but wants to be Debt Free in the near future.

The case study chosen today is from one of our many clients who have overcome their debt problems in no time, the name is withdrawn due to privacy reasons, but for the purpose of the case study we will call our client Michael.

The Case

Michael came to us with over $400000 in mortgage debt jointly owned with his partner and the property was worth $490000, both Michael & his partner shares expenses, with income for the family averages at $1500 per week after tax deductions, the income is enough to service the mortgage and give them a comfortable lifestyle.

Michael also have other debts, largely due to investing in the son’s future, he used to be the only one working while his partner was raising the family.

Michael’s debts spiral across 6 credit cards and one unsecured personal loan, the credit cards are all maxed out and he is only making minimum monthly payments on them, the unsecured debt totals $91718, the minimum monthly payments on the credit cards and monthly payments on the personal loan cost him another $2000 on top of his mortgage payments of $2100 per month.

Michael is paying around $4100 per month on all the debts including the mortgage, with income around $6300 per month and $4100 in debt repayments, he & his partner are left with nothing once all the other expenses like utilities, rates, petrol etc goes through.

Michael was trying to put his house on the market unwillingly as no bank would help, he is trying to rebuild his life but he is 59 and is not getting any younger, he was not sure if he ever will be able to build another house or end up renting.

Debt Negotiators Advice

After hearing his story we assured him that the help is available and is not only limited to banks, one think we commend is his effort on raising such a good family, We advise to look at the Debt Agreement as one of the options, to qualify for the debt agreement, one has to satisfy all of the below:

Be insolvent

Net Income for the year to be less than $71539.65 or less than roughly $1375 net a week.

Personal Individual Equity to be less than $95386. 

Unsecured Debts to be less than $95386.

 Should not be a discharged Bankrupt for less than 10 years or having already done a Debt agreement in the last 10 years

With satisfying all the prerequisites to do a Debt Agreement, we looked at Michael’s family income and expenses to work out a budget and uncommitted income, We work it out that the under a Debt Agreement he can keep his mortgage payments the way it is but consolidate other debt payments for which he is struggling, we lodged a Debt Agreement for him making him pay $980 per month over 5 years.

Debt Agreement has been a lifeline for him and has done wonders; he is on his way to be debt free. This is how the Debt Agreement has helped him:

1. Reduce his unsecured debts payments from $2000 per month to more manageable $980 per month thereby saving him over $1020 per month in order for him to live on a comfortable lifestyle.

2. The interest will not be there anymore, he only have to contribute towards his principal while paying no interest.

3. He will be paying back $58800 as opposed to original $91000 he had borrowed thereby saving him over $32200 on principal amount over 5 years.

4. He is physically and mentally in a much better position, life has changed and so is the lifestyle.

5. He will be debt free in 5 years and is looking forward to an overseas holiday he had previously planned with his partner but could not make it due to the debt reasons.

6. He cannot borrow money for the next 7 years, this has worked as a blessing in disguise, and instead of depending on credit he is dependent on his savings.

We at Debt Negotiators come across these stories every day,  these stories is what keeps us going and drives us, please talk to us and let us know if your debts are getting out of control, call 1300 351 008 and speak to our friendly advisors who can help and guide you to a better future.


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