What is a Part 9 Debt Agreement?

When you’re overloaded with unpaid bills, credit card and loan repayments, you might begin considering debt relief options. One of the options you may have heard of is a Part 9 Debt Agreement.

Let’s look at what a Part 9 Debt Agreement is, how it works, your obligations, and what the impact will be on you and your family of entering in to a Part 9 Debt Agreement.

What is a Part 9 Debt Agreement?

A Debt Agreement is a way to clear your unsecured debts when you are in genuine financial difficulty. Unsecured debts are credit cards, personal loans, tax debt, old power bills, school fees, Centrelink debts, etc., and not debts that have been borrowed against a particular asset. It is a form of bankruptcy.

Under a Debt Agreement, your repayments on these unsecured debts are renegotiated by a Debt Agreement administrator to a more affordable level. For example, your repayments might only be 70% of what they are now, repaid over four years.

In order to negotiate your repayments, the administrator examines your current income and expenses to determine a repayment figure that will be acceptable to you and your lenders. It is then presented to the lenders for a formal vote. If 50% of the dollar value of your lenders agree to the proposal, it becomes legally binding for all of them, even those who voted against it.

Once your Debt Agreement has been accepted and formalised, you simply make one regular repayment to your administrator, who in turn pays the various lenders.

Eligibility for a Debt Agreement

To be eligible for a Debt Agreement, your total unsecured debts must be below $109,473 and your after-tax income for the current financial year must be below,or expected to be below, $82,105 (figures current as at Dec 2017). If you don’t meet these criteria you may still be eligible for a Part 10 Insolvency Arrangement or bankruptcy.

If you’ve been discharged from bankruptcy or been in a Debt Agreement in the last ten years, you cannot apply for a Debt Agreement. If you have court imposed fines or HECS debts, they cannot be included in a Debt Agreement.

Obligations and Implications of a Part 9 Debt Agreement

Once your Debt Agreement is in place, it is important that you maintain your regular repayments. If your circumstances change and they are become unmanageable, you need to let your Debt Agreement administrator know straight away.

Either yourself, or the administrator with whom you have entered a Debt Agreement, can apply in writing for a variation. The lenders must use the same approval process that was used to approve the original Debt Agreement to determine the acceptability of the proposed variation.

Entering into a Debt Agreement will affect your credit rating. It will be noted on your credit file for a minimum of five years. While you’re repaying your Debt Agreement, you’re unlikely to be able to borrow anything further. Information regarding your Debt Agreement will also be recorded on the National Personal Insolvency Index for either 5 years from the date of commencement, or at the completion of your Debt Agreement, whichever comes later.

If you need a debt relief solution and you have sought financial advice on the different options available to you, a Debt Agreement may be the best choice for you. Debt Agreements are preferable to filing for bankruptcy, as bankruptcy has more lasting implications. These include the sale of your assets to cover outstanding debts, potential impact on your current or future employment, and restricted permission to travel overseas.

How to Apply for a Part 9 Debt Agreement

Once it has been determined that applying for a Debt Agreement is the best option for your personal circumstances, you need to choose a Debt Agreement administrator.

It is important that you choose an administrator that will make a fair offer to your lenders, who are experienced in dealing with all of the major Australian lenders. This will save you the time and cost of a rejected offer. They will also have the experience and knowledge to accurately assess your eligibility and explain any pitfalls to look out for.


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