Debt Agreement vs Bankruptcy

As most of us are aware, “Bankruptcy” has been around for many years and is a method to legally declare a person “unable to pay your creditors or debts”

Nowadays it is becoming an increasingly popular method to extinguish debts due the increase in personal credit and cost of living. In most cases, it saves those involved a lot of stress and people are able to make a fresh start on their financial future without battling for many years & dealing with angry creditors to pay their debts.

Bankruptcy also does not carry the “shame” that it used to in earlier years with many people around us declaring Bankruptcy without us never knowing it.

The bankruptcy act has many parts to it and it is important to understand the increasingly popular Part IX Debt Agreement.

The Part 9 Debt Agreement is an alternative to Bankruptcy and was introduced by the government (AFSA) in 1996; it involves a consolidation of all unsecured loans belonging to a person. These loan accounts are closed, interest is frozen, and then the applicant is able to pay them off over a period of up to 5 years with one single repayment. The assessment of an applicant is fairly simple and straightforward, only the household incomes, debts and expenses are required to determine the suitability for a Debt Agreement.

The Debt Agreement only affects a person’s Credit Rating for up to 7 years as it is blacklisted.

A Bankruptcy however, carries a lot more work and requires a trustee company to administer it. A “Bankrupt” cannot work in certain jobs, travel overseas without permission of the trustee & has to ensure they do not have significant assets etc… Banking records may also be investigated tracing some years back.

Debt agreement vs bankruptcy

Benefits of each:


– Ability to walk away from all your debts without paying anything back (unless your income is over $55,000 p.a.)

– You may be discharged from a Bankruptcy in as little as a few months, hence you can go back to normal living (except borrowing money)

– Effect on your credit rating is very similar to that of a Part IX Debt Agreement

Debt Agreement:

– Relief from paying off multiple debts and one single repayment with no interest to creditors

– No other restrictions apart from “Bad Credit” for a few years

– Your creditors will receive most of the debt you owe them back unlike bankruptcy

If you do need further assistance or help with your current Debt Situation, give Debt Negotiators a call on 1300 351 008 and we can help you to consolidate and pay off these debts with one easy payment or point you in the right direction


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