You might have heard that temporary debt protection (TDP)  can temporarily release you from debt obligations. That is correct. This program is designed for individuals looking for reprieve from overwhelming debt.

While it seems excellent news, there’s more to TDP than meets the eye. We’re here to help explain this debt solution so you know if this is the right path for you.

What is temporary debt protection?

Temporary debt protection (TDP) is a feature of the Bankruptcy Act 1966 that allows people in financial distress a respite from their creditors. When you apply for TDP, you’re notifying your creditors that you’re facing financial hardship and need time to address your situation without the constant pressure of debt recovery actions.

Once TDP is in place, it legally prevents most creditors from taking recovery action against you for your debts for 21 days. This includes halting any current or impending legal actions and stopping the process of garnishing your wages.

Note that TDP does not eliminate your debt; it’s a temporary shield that gives you some breathing room.

During the TDP period, you can use the time to:

• Consult with financial advisors or debt counsellors to explore your options and develop a plan to manage your debts
• Consider your options, such as restructuring your debts, entering into a debt agreement, or, in some cases, considering bankruptcy as a last resort
• Negotiate payment plans or settlements with your creditors, which might be more manageable given your financial situation and
• Develop a budget or a financial plan that helps you avoid similar situations in the future.

Who is eligible for temporary debt protection?

You can qualify for TDP if you cannot pay your debts when they are due. This doesn’t necessarily mean you must be insolvent, but your financial situation should make meeting your debt obligations unfeasible.

Besides this criterion, you should also meet the following conditions:

• You haven’t been accepted for TDP in the last 12 months
• You don’t have a debt agreement with any of your creditors
• You have not filed for a personal insolvency agreement
• You have not been served with a Creditor’s Petition that has been filed in the court

Consequence of TDP

Applying for TDP is an act of bankruptcy under section 54A of the Bankruptcy Act 1966. This means you acknowledge that you cannot pay debts, which a creditor could use as the basis for an application to the court to declare you bankrupt.

Other important TDP information you have to know

Resumption of debt collection

Once the 21-day protection period under Temporary Debt Protection (TDP) ends, and if you haven’t applied for bankruptcy, creditors regain their legal right to pursue debt recovery. This means they can resume garnishing your wages or seizing your goods to recover the debts owed. Basically, once the temporary halt provided by TDP is lifted, all standard debt recovery processes can continue.

Not all debts are not covered

Secured creditors (creditors who have a security interest in your assets, like a mortgage or car loan) can still repossess your assets even while you are under TDP. TDP does not protect against repossession by secured creditors.

Other debts not covered under TDP are:

• Child support debts,
• Higher Education Loan Program (HELP) debts, and
• Fines imposed by a court.

This means you remain responsible for these debts, and the relevant authorities or organisations can continue their collection efforts.

Creditors can still contact you

During the TDP period, your creditors can still contact you to seek payment. While TDP halts some forms of debt recovery action, it does not entirely stop all communication or negotiation attempts from your creditors.

Continuation of legal action

If your creditors have not initiated or have only recently started legal proceedings when you are accepted for Temporary Debt Protection (TDP), they are still allowed to continue these legal actions during the TDP period. What they cannot do is enforce any judgments from these legal proceedings while TDP is in effect. This means that while they can pursue their case in court, any enforcement of the court’s decision, such as seizing assets or garnishing wages, must wait until after the TDP period has concluded.

Reapplication is restricted

Once your TDP is accepted, you cannot reapply for 12 months, so you must find a way to settle your debt obligations.

How to apply for TDP

Assess your situation

Before applying, carefully consider whether TDP is suitable for your financial circumstances. Seek advice from a financial counsellor or advisor to ensure this is the right step.

Prepare all required documents

Gather necessary documentation, including personal identification, details of your debts and creditors, and financial information like income, assets, and expenses.

Complete the TDP Form

You can fill out the Declaration of Intention to Present a Debtor’s Petition form, available on the Australian Financial Security Authority (AFSA) website, or you can contact them to get a printed copy.

Submit the form

You can submit your TDP application either online via the AFSA website or by post mailed to:

• Australian Financial Security Authority
• GPO Box 1550
• ADELAIDE SA 5001

Wait for the result

After you submit the form, the Official Receiver reviews your application to ensure eligibility and completeness.

If your application is accepted, the Official Receiver will notify you, your authorised representative, and all listed creditors. Otherwise, the Official Receiver will call or write to explain why your application was denied.

If you’ve nominated other parties (like your employer) to receive the notification, the Official Receiver will also inform them.

If you later identify additional creditors not included in your original form, inform the Official Receiver in writing. They will notify these creditors unless the TDP period is seven days close to ending.

You can inform the Official Receiver if you’ve omitted any material information about your income or property. Depending on the omission’s materiality and the remaining duration of the TDP period, a revised notification may be sent to all creditors. But no new notification will be sent out if there are less than four business days left.

Use the protection period wisely

Use this time to seek financial advice, negotiate with creditors, and formulate a long-term debt management strategy.

Plan your next steps

As the TDP period nears its end, evaluate your situation and decide on the next steps, including filing for bankruptcy, entering into a debt agreement, or other debt management solutions.

Contact Us for Debt Help Today

Applying for TDP is a significant step in managing debt. It’s crucial to give it a lot of thought. Before you make any decision, have a chat with us. At Debt Negotiators, we’ll closely examine your financial situation and help you figure out if TDP is the right choice for you. If it isn’t the best fit, we will guide you towards other debt solutions that might suit you better. Contact us today, and let’s start working towards a solution together.