Debt Agreements ( DA )
What is a Debt Agreement
Debt Agreements are arrangements between people who are unable to pay their debts and their creditors. These arrangements can either be formal or informal. However in both cases the idea behind a Debt Agreement is that set repayments are negotiated down to a level affordable to the person responsible for the debts.
These arrangements are there to prevent people from unnecessarily declaring bankruptcy for debts they are unable to repay. Debt agreements require a commitment from both the debtor and their creditors. If you are unable to maintain the agreed repayments under your debt agreement your debt problems could potentially worsen.
Informal Debt Agreements
Informal Debt Agreements are arrangements between you and your creditors that are not regulated by government legislation or defined in a documented contract. You may chose to seek the help of a Debt Specialist in order to negotiate an arrangement with your creditors that will reduce your debt level or make a repayment plan that is mutually beneficial.
A debt negotiator can work towards negotiating with your creditors for your debt repayments to be reduced for a period of time due to your financial difficulties. You may decide to negotiate with your creditors yourself or employ the services of a professional debt negotiator.
There is no government regulation for this arrangement and quite often this is only a short term debt solution while you regain financial control of your life. You may have lost your job, had a relationship breakdown or experienced some illness and this could have contributed to your current financial problems.If such an even occurs to you, maintaining set loan can be challenging.
An informal debt agreement may be about allowing you to make reduced payments for a period of 12 months while you find your way back to your prior levels of income. Informal Debt Agreements by their nature, can offer no real stability or guarantee to either party.
You creditors may decide to back out of a negotiated agreement at any time. It is therefore advisable to document the terms of your agreement n writing.
Formal Debt Agreements/Part 9 Debt Agreements
A formal Debt Agreement is also known as a Par 9 Debt Agreement as it is regulated by Part 9 of the Bankruptcy Act of Australia. A debt agreement is a negotiated arrangement between you and creditors governed by government legislation and regulated by the Insolvency Trustee of Australia (ITSA).
If you are insolvent, on a low income with few or no assets you will find that a formal debt agreement is a cheap alternative to declaring bankruptcy and should be considered. A debt specialist will document a debt agreement on your behalf and lodge the proposed agreement with ITSA.
Your creditors will then be required to vote on your proposed agreement and as long as at least 75% of all debt holders agree as well as majority of creditors, the agreement will be registered.
All creditors with documented and provable debts against you at the time that that your details are recorded on the National Personal Insolvency Index (NPII) have a legal obligation to abide by the agreement, even if they did not vote to accept the debt agreement proposal.
The date that your proposal is recorded on NPII, all of your existing debts are frozen, interest stops accruing on these and your creditors are unable to take any further action against you providing you maintain repayments as defined in the debt agreement.
Any debts that you incur subsequently to this date are not covered by the debt agreement and are your own responsibility.