If you have gotten in over your head in debt, you may be considering a Part 9 Debt Agreement. Here’s how it works, what it can do for you, and what happens after it’s over.

Entering a Part 9 Debt Agreement

If you reach a point where you are unable to pay what you owe, a Part 9 Debt Agreement can provide welcome relief. When you enter such an agreement, your debts are repaid over a period of time and the included creditors will stop calling, whilst you are Party to a Part IX Debt Agreement. After the completion of your Debt Agreement you will have a clean slate on which to rebuild your financial life.

Typical Length of a Debt Agreement

A Part 9 Debt Agreement usually lasts for five years. Depending on your circumstances, it may be extended or reduced. A Debt Agreement will be noted on your credit file, and your name will be added to the National Personal Insolvency Index.

Provided you complete your Debt Agreement obligations on time and do not miss any payments, it will be removed from your credit file after approximately five years. This will still be listed on your credit file for a minimum of 5 years, even if you pay it off early. Your name will be removed from the NPII after five years also, or within one month and one day of being discharged if that is longer than five years.

Your Credit File History

While you are under the debt agreement, you should not apply for financing of any kind. This, along with the insolvency, will likely result in a decline in your credit score for the five years of your agreement. Once the agreement is over, your score should increase accordingly. You can then begin to slowly rebuild your credit but be sure not to take on more than you can handle.

What Happens to Your Debt?

When you enter into a Part 9 Debt Agreement, your unsecured debts that are included in the Debt Agreement are consolidated and during the term of the Debt Agreement, your included creditors will no longer be able contact you. Consult you Debt Agreement Administrator if you are unsure about which debts can be included in your agreement.

Breaking a Debt Agreement Early

If you are having difficulty paying your Part 9 Debt Agreement, talk to your administrator immediately. If the difficulty is due to a change in your circumstances, it may be possible to propose a variation of the Debt Agreement. If you simply stop making payments, you will be breaking your agreement and if the Part IX Debt Agreement gets terminated due to either non-payment, or by creditors requesting this due to payment history etc., your creditors will then have the right to commence their own recovery actions against you, including all interest that was previously frozen whilst party to the Part IX Debt Agreement. At that point, Bankruptcy might be the only suitable option.

A Part 9 Debt Agreement can be the first step to rebuilding your financial life. Understanding and adhering to the terms of the agreement is critical.