It is important that an individual understands his or her eligibility before doing a debt agreement. Not everyone is eligible to do a Debt Agreement. This article aims at providing a guideline on the eligibility criteria before applying for this type of agreement.
To do a Debt Agreement the most important test is Insolvency test.
Insolvency test – There are no clear rules as to who is insolvent, an individual can be insolvent when analyzed by one financial advisor to the other. The rule of thumb to identify someone who is insolvent is their inability to pay the bills or debts when it falls due. The individual is also insolvent when it is accessing other credit facilities to pay the bills on time an example is using credit cards cash advance to pay for another credit cards minimum balance often known as Cash flow insolvent.
Once insolvency is justified, the following preconditions exist before doing a Debt Agreement (Ref: https://www.afsa.gov.au/):
· The individual should not be subjected to any administration under the Bankruptcy Act for the last 10 years. This is done through a check at National Personal Insolvency Index (NPII) using Debtors name, DOB and any other alias.
·The individual cannot propose an agreement if the unsecured debts including any shortfall between a secured debt and the value of the security are more than $94530.80 as on Jan, 2012.
·The individual cannot propose an agreement if the total equity or divisible property more than $94530.80 as on Jan, 2012.
·The individual cannot propose an agreement if the after tax income for the year is more than $70898.10 works out approximately $1363.43 per week after tax as on Jan, 2012.
What happens if I cannot do a Debt Agreement?
Individuals who are not eligible to do a Debt Agreement have access to bankruptcy or Part X where their affairs will be investigated by a trustee.
To do a free assessment on the eligibility to propose a Debt Agreement or see if it can help you be Debt Free, call 1300 351 008 and one of our friendly advisors can guide you through.