Debt Agreements offer an effective debt solution for people who have significant unaffordable unsecured debt. However individuals who are on a high income or those who have a mixture of secured and unsecured debt may find that a Debt Agreement is unsuitable for their circumstances and alternative debt remedies need to be investigated.
Debt agreements can have some adverse affects on the individual’s credit history and therefore a decision to enter a debt agreement should not be made lightly.
What are debt agreements
A debt agreement is a binding arrangement between a debtor and his unsecured creditors under Part IX of the Australian Bankruptcy Act of 1966. What few people understand, is that proposing a debt agreement, is actually an act of bankruptcy. If your proposal is rejected by creditors, it may actually result in creditors pushing you into bankruptcy. However if your proposal is accepted, you will be signing up to a period of agreed affordable periodic payments, at the end of which you will be completely debt free. That can be a very attractive proposition.
Will you qualify for a Debt Agreement
The Bankruptcy Act defines the circumstances under which an individual may qualify for a Debt Agreement. These include :
- Amount of unsecured debts (as a total);
- Individual’s level of income;
- Individual’s assets;
- Previous bankruptcy history, etc.
Key advantages of debt agreement
There are numerous advantages to entering a debt agreement. Some of these include:
- outstanding debt stops incurring interest;
- negotiate down debt balance;
- debt collectors stop chasing you;
- debt repayments become affordable;
- become debt free sooner.
What can go wrong?
One possible consequence of a Debt Agreement is finding yourself being suddently pushed into bankruptcy by your creditors. This can occur when you first lodge an application for a debt agreement – as the act of doing so confirms to all concerned that you are unable to afford your current debts.
This can also happen if you miss any of the set repayments or breach the agreement in any way.
What are your alternatives?
There are a number of alternatives to a debt agreement depending on your personal circumstances. You may be able to qualify for a :
- Debt Consolidation Loan;
- Zero rate Credit Card (for card debt rollover);
- Personal Insolvency;
- Informal Debt Negotiation;
- Hardship Arrangement;
- Early access to superannuation, and even