What Happens After A Debt Agreement?

A Debt Agreement is a legal structure which provides relief from debt by allowing you to renegotiate terms with your creditors. It often results in lower repayments, and can mean paying only part of your full debt amount.

Debt Agreements are an alternative to bankruptcy, available through Part IX of the Bankruptcy Act. 

When the terms of the agreement have been met, unsecured debts are released and you will no longer need to repay them. You may still be liable to pay certain types of debt, such as court fines, student loans, and any debt accumulated after applying for the debt agreement. 

People who are struggling with debt are often concerned with the long-term impact of a Debt Agreement, and rightly so. Debt Agreements have serious financial consequences, and although they are not as severe as bankruptcy, they are considered ‘acts of bankruptcy’. 

As such, Debt Agreements also appear on the National Personal Insolvency Index for a minimum of 5 years.

Effects On Credit Rating

Debt Agreements have an adverse effect on your credit rating, but this is not as long lasting as you might think.

Changes to the Privacy Act in 2014 mean that information can only be stored on your credit file for 5 years. Your Debt Agreement will be wiped from your history 5 years after the agreement begins. 

During this time, you may find that you are unable to gain credit. However, this can actually help you to improve spending habits, and after 5 years many find that they are able to walk away from the situation debt free.

In the long term, getting on top of debt can have a positive effect. 

Appearance On National Personal Insolvency Index

The National Personal Insolvency Index (NPII) is a public record of all cases of insolvency in Australia. This may negatively affect your ability to get credit, as well as your professional and business life.

A debt agreement is kept on the NPII for a limited time, and the amount of time depends on how you finished your agreement.

  • If you completed the obligations of your debt agreement, the information will be removed 5 years after the agreement started, or on the date your obligations are complete, whichever is latest.
  • If your creditors terminate your debt agreement, the agreement ends due to six month arrears default, or the court voids your agreement, then the information will be removed 5 years after the starting date, or 2 years after the termination or court order, whichever is latest. 

A Debt Agreement usually lasts for 5 years. During this time, you will find it difficult to get credit, and your information can be accessed via the National Personal Insolvency Index.

After 5 years, providing you complete all your obligations, your Credit File and the NPII will be wiped clean and you get a fresh start.

If you are struggling with debt and need professional help and advice, contact Debt Negotiators today. We may be able to find an informal solution to your debt, and if not we can facilitate a smooth debt agreement between you and your creditors. Learn more about your options with Debt Negotiators. 


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