A Debt Agreement is a way of breaking free from debt when you’re struggling. In this article we’ll look at:

  • How a Debt Agreement works.
  • Whether or not you’re eligible to apply.
  • The consequences of entering a Debt Agreement.
  • How to choose a Debt Agreement administrator

How does a Debt Agreement work?

A Debt Agreement is a way of clearing your debts when you’re in genuine difficulty.  It’s important at this point to note that a Debt Agreement applies to unsecured debts (credit cards, personal loans, tax debt, old power bills, school fees, Centrelink debts, etc) and not secured debts, in other words, debts that have been borrowed against a particular asset  (such as home loans or most vehicle loans).  Under a Debt Agreement, your repayments on these unsecured debts are re-negotiated to a more affordable level, with the approval of the lenders you owe.  So for instance,your repayments might only be 70% of what they are now and for only 4 years.

A Debt Agreement administrator looks at your current income and expenses, helps determine a repayment figure that will be acceptable to you and your lenders and then presents it to them for a formal vote.  The lenders can at that stage accept or decline the new proposal.  Generally however, most lenders will accept a reasonable offer if you are in genuine hardship.  One key reason for this is that under a bankruptcy, the lender may receive no return at all, depending on your income and assets (and so a Debt Agreement is usually preferred).  A Debt Agreement administrator will determine if this is the case in your situation and therefore whether or not your Debt Agreement is likely to be accepted.

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

Is a Debt Agreement a possibility for me?

To answer this, a professional debt administrator needs to know who you owe and how much, how old the debts are, what your current income and expenses are and if you’ve previously been bankrupt or entered a Debt Agreement.

With this information they can work out whether you’re eligible and what a reasonable repayment offer will be – one that you can afford and is also likely to be accepted by your particular mix of lenders (they all have different criteria, including some who don’t accept Debt Agreements).

Are you eligible to apply?

There are certain factors that can make you ineligible to apply for a Debt Agreement.  Some of the main ones are listed below.

  • If you have more than $109,473.00 in unsecured debts or assets or if your after tax income is greater than $82,104.75 you cannot enter a Debt Agreement, but you may still be able to apply 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. In this situation, you can still apply for bankruptcy, subject to bankruptcy laws.
  • If your debts are secured by an asset, for instance a home loan or most vehicle loans you will not be able to include them in a Debt Agreement.
  • If you have child support payments, court imposed fines or HECS debts, they cannot be included in a Debt Agreement.
  • If you can comfortably afford the repayment on your existing debts you are not insolvent and are ineligible for a debt agreement.

The legislation regarding Debt Agreements changes constantly, as do the requirements of individual lenders, so it’s important to speak with a Debt Administrator to work out whether you’re eligible.

What happens if I am eligible?

If you are eligible and you wish to proceed, your Debt Agreement administrator will begin preparing your application.  This involves conducting a detailed interview with you (usually over the phone) to work out your financial position and make clear your hardship to your lenders.  They will also complete the statutory paperwork required by the Federal Government agency, AFSA (Australian Financial Security Authority) and then present the required paperwork to AFSA and your lenders for a formal voting process.  If 50% of your lenders (holding at least 75% of your debt) accept the proposal, it is then approved and becomes binding on all your lenders, regardless of how they voted.

What are the consequences of entering a Debt Agreement?

A Debt Agreement will be noted on your credit file for 5 years. This is the record checked by lenders when you apply for personal loans, mortgages, credit cards and store finance. Different lenders will respond to this notation in different ways, but you’re likely to experience the following consequences.

While you’re repaying your Debt Agreement (which usually takes between 2 and 4 years) you’re unlikely to be able to borrow anything further, which includes via credit cards, personal loans or any other kind of unsecured debt.

Information regarding your debt agreement, including your name, and some other details, will be recorded on the NPII National Personal Insolvency Index for a limited time. When you’ve completed your debt agreement, the NPII notation will be removed, but no sooner than five years from the date the debt agreement commenced.

Your ability to obtain further credit may be affected.  Details of your debt agreements  may also appear on a credit reporting agency’s records for up to 5 years.

How to Choose a Debt Agreement Administrator

Given the impact that debt can have on your life, as well as the time involved in establishing a Debt Agreement, it’s very important to choose the right Debt Agreement administrator.  There are two points that are especially important to consider and we’ll look at both in turn.

The first is that you have to choose an administrator that will make a fair offer to your lenders.  This is crucial.  Unfortunately, some administrators make the offer too low in order to win your business. A debt agreement repayment should be the largest amount you can comfortably afford.  When you’re speaking to your administrator ask them why they have made the repayment proposal they’re suggesting to you.  Have they just pulled this figure from thin air?  This ties in neatly, to our second point.

Choose an experienced Debt Agreement administrator.  An experienced administrator will have dealt with all of the major Australian lenders several times and will have good working relationships with them.  This will ensure that they offer the right amount in your repayment proposal, saving you the time and cost of a rejected offer.  They will also have the experience and knowledge to truly assess your eligibility and explain any pitfalls to look out for.

In this article, we’ve tried to cover the key areas of a Debt Agreement, including how they work, whether or not you’re eligible, the consequences of entering a Debt Agreement and how to choose an administrator to set one up for you.  While this is useful general information, it’s important to get specific information tailored to your current position.

For an obligation free consultation, call one of the friendly team at Debt Helpline on 1300 802 905 today.

26 thoughts on “Part 9 Debt Agreement

  1. I have a chronic debt I need to try and resolve.
    I owe the following:
    Commonwealth $7300
    ANZ $15500
    St George $5500
    Virgin $5500
    GE $4000
    GEM $2100
    Coles $1100
    Woolworths $3200
    Plus a car loan and three small loans which I am currently unable to pay even minimums of.
    My fiancé and I own a unit and we pay the mortgage on that but I’m struggling to maintain the rest of my bills.
    Please help.

    • Hi Chad,
      We are more than happy to help you regain control over your finances.
      I have forwarded your details onto our consultants team who will be in contact with you today.
      If you’d rather speak to someone immediately, feel free to call a consultant direct on 1300 802 905.

  2. Hi I got a part 9 a in 2008 and only fi is he’d paying it off in 2011 I was just told that it stays on my file for life is this true as I was not told any of this before I signed up for this. And I’m wanting to buy a house soon. Is this going to affect the chances of me getting a loan for a house??

    • Hi Angelique,
      A debt agreement is removed from your credit file after 5 years. If the notation still appears on your credit file we suggest contact the Debt Agreement Administrator that managed your agreement and requesting the clear the default.

  3. Hi there,

    I am currently living in NZ.

    I have a 37k unsecured personal loan with ANZ, and 38k worth of credit card debt with Westpac (All in Australia) I also have a 24k personal loan with a bank here in NZ.
    I am unable to service this debt. Am I able to apply for a debt agreement for my Australian Debt from overseas?

    Please help


    • Hi Mark,
      You are best to do the arrangement in NZ. This is for two reasons:

      1. Payments for a Debt Agreement need to be made from an Australian bank account, therefore each and every payment is subject to exchange rate losses each week, fortnight, month. A very expensive way to make payments.
      2. Living in NZ the cross boarder Insolvency Act would not protect you from ANZ collecting 100% of their debt from you or stopping legal action – so you could be paying our Debt Agreement for the Australian debt, then the personal loan outside of the Debt Agreement – thus probably paying 100% back of all your debt over the 5 years as we still need to collect the full Debt Agreement amount.

      We recommend speaking to a local Debt Solutions provider for more information.

  4. My situation is due to ill health which prevents me going out to work. I am 62 years old
    and earn no income what so ever. Centrelink has refused me any help as my assets are higher than their threshhold. I have a credit card debt of $25K, which I cannot service. I have one asset an Apartment which I have engaged to a realestate Agent to sell. Once sold my problem will be resolved. however, with the slump in the realestate market I do not know how long it will take to sell.. I have only $500 in savings My son is supporting me by paying what he can towards the normal bills Also, I cannot service the Strata fees of $550.00 a quarter, so the fees are amounting and accruing interest. Could you please assess and give me some feed back as to what I can do. Judith

    • Hi Judith,
      Thank you for reaching out to Debt Helpline. We have passed on your details to our consulting to contact you directly via email. You are welcome to call should you require immediate assistance – 1300 802 905.

    • Hi Pandora, Providing we are your debt agreement administrator just call our Client Support Team on 1300 883 758 Monday to Thursday between 8:30am – 6:00pm AEDT. They’ll be more than happy to help.

  5. Im enquiring for my son who has numerous infringement fines for tolls. Due to penalties & interest they wont it debt be paid off due to it over $10,000. So in mean time it keeps climbing. Can he claim part 9 to get all interest & penalties dropped which would bring it under $10,000

    • Hi Donna, Sorry to hear about your sons situation. Sadly we are not able to help with speeding fines, infringements, penalty notices, parking fines, toll charges etc. I wish there was more we could do, however our hands are tied.

  6. Hi im currently in a part 9 debt agreement and was wondering if i can start up a business legally whilst in this agreement

    • Hi Shaun,
      The Bankruptcy Act 1966 does not impose any restrictions on employment in any trades or professions.

      Particular industry associations or licensing authorities may impose certain restrictions or conditions should a member or licensee become enter into an arrangement under the Bankruptcy Act.

      To check on possible restrictions on continuing with particular trades or professions just follow this link: https://www.afsa.gov.au/insolvency/i-cant-pay-my-debts/employment-restrictions

      Be sure to let us know how you go, and if we can be of any assistance.

  7. I am currently on visa 457 working here as non resident in australia. Will I be able to apply for a part 9 debt agreement and will it affect my visa? Will my visa be void if i enter such an agreement?

    • Hi Jeffrey, That is a really good question. You can apply for a debt agreement for unsecured debt that originates with Australia. We have never come across an example where a debt agreement has negatively affected a 457 working visa. However business visas (subclasses 132, 188, 888, 890, 892, 891, 893) assess your previous business experience. You would be best speaking to an immigration representative regarding any consequences before exploring a debt agreement as a solution to debt.

  8. Hi I have just started paying my debts of $22000 on a debt agreement 2 weeks ago. I have come into some money and was wondering if I can clear up my debt. Will I still have to wait 5 years to have my name on file?

    • Hi Sean, we would need to look into your individual Debt Agreement. Please contact our office on 1300 883 758 so we can provide the best information possible.

    • Hi Bruce,
      That’s a great question, thanks for asking!
      If you enter a debt agreement and pay it out early, it will appear on your credit file for the full 5 years. On a positive, the notation would be updated to reflect that it has been paid off. From there it’s up to creditors if they wish to lend to you.
      After the 5 year period a Part 9 Debt Agreement will no longer appear on your credit file, unlike bankruptcy which remains on the NPII forever.
      Would you like one of our consultants to give you a call to discuss this in more detail?

    • Hi Matt,
      We have few solutions to eliminating debt, so it would depend on which product best suits your financial situation. Generally we combine the debt, reduce payments and see our client’s debt free in no more than 5 years. We provide free debt assessments, so give us a call so we can source the best solution and walk you through the process.

  9. Hi I have been struggling with debt for some time now, I have around $40000 debt and high interest. I saw foxsmey online and started to do a debt agreement they have been really helpful until I went to sign the paperwork and saw 22% administrators fee. I didn’t sign it cause I’m not paying that. I worries they are still going to take money off me cause They have them authority on my accounts

    • Hi Michael. The 22% is over 5 years and is out of the total paid not on top of it. Check what you are paying in total, that’s the most important thing.
      You can talk to Fox Symes and they will surely cancel their direct debit. If you’re concerned you can cancel their direct debit via your bank also.

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