Benefits and Drawbacks of a Part 9 Debt Agreement

As with any debt solution there are some benefits as well as some drawbacks when it comes to Debt Agreements.

Benefits of a Debt Agreement

  • Reduced repayments – your repayment in line with your debt agreement will be a reflection of what you are able to afford and therefore once you agree to proceed you will have less financial pressure on you and your family on a day-to day basis.
  • Interest stops accruing on debts – unlike your current debts there will be no interest accruing on the outstanding balance of the debts included in your debt agreement ;
  • Helps you become debt free sooner – at the end of the Debt Agreement period providing you continue making payments as agreed your prior debts included in the debt agreement will be wiped and you will potentially be debt free.
  • Stops debt collectors – Debt collectors are not allowed to continue hounding you after you enter a debt agreement and if they find out that you have reached an agreement yo will be able to live in peace without needing to avoid taking phone-calls ;
  • Have to only make one repayment – You will only have a single interest free repayment to make;
  • Less severe than bankruptcy – while a part 9 Debt Agreement is regulated under the Bankruptcy Act it is less severe than bankruptcy. Your assets do not come under the control of the Bankruptcy Trustee. However your debt agreement will be listed on your credit record for a seven year period even if you gets repaid sooner;
  • You no longer need to talk to your creditors – this is a great advantage to those stressed by call from credit providers.
  • Majority acceptance only is required – Even if some of the creditors refuse to accept your proposal, it can still be registered with NPII and implemented into an agreement.


Drawbacks of a Debt Agreement

  • Creditors may not accept your debt agreement – there are no guarantees of acceptance and f they do not your debt problems remain as does your risk of bankruptcy;
  • Detrimental to your credit report and future ability to borrow – for as long as you are n a part 9 debt agreement t is not treated by lenders as a simple loan. You will find it pretty much impossible to qualify for a loan until your agreement is repaid. After repayment, unsecured loans will still be difficult to qualify for until your part 9 is no longer showing on your credit report (7 years);
  • If you fail to abide by the set repayments in you agreement there could be further repercussions to your financial situation – your creditors could cancel the debt agreement and past problems will return;
  • Can only negotiate away some debt. For example you will not be able to negotiate or reach an agreement with the Tax Office as part of your Debt Agreement.
  • You may not qualify for a debt agreement – as certain qualification rules apply.


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