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Are you finding it tough to deal with your debts and can’t consolidate them? Do you want to stop creditors from chasing you? Consider a debt agreement! 

What’s a Part IX Debt Agreement? A Part IX debt agreement is a legal deal under the Bankruptcy Act 1966. Instead of declaring bankruptcy, you make a binding agreement with creditors to pay off your debts in a certain way. An administrator handles the payments to creditors. Once you meet the agreement terms, the debt is considered fulfilled, and you don’t have to pay anything more. Unlike debt consolidation, which involves taking out another loan, a debt agreement doesn’t. 

Qualifying for a Debt Agreement: Most heavily indebted people can qualify for a debt agreement. Ask yourself these questions to check your eligibility: 

• Can your debts be included in the agreement? 
• Credit card, tax debts, and personal loans can be included, but car loans and mortgages cannot. 
• Can you make reduced repayments? 
• If you can’t commit to repayments, a debt agreement may not be the solution. Some people agree to sell an asset instead of making repayments. 
• Can you enter into a debt agreement? 
• A debt agreement is only available to individuals who are insolvent, meaning they can’t pay debts as they fall due. 

Other requirements under the Act include: 

• No previous debt or bankruptcy agreement in the past ten years. 
• After-tax income less than $89,339.25. 
• Unsecured debts less than $119,119.00. 
• Property divisible among creditors, if bankrupt, valued at less than $238,238.00. 

Are There Any Costs? The administrator charges a fee for their services, usually paid as part of your repayments under the agreement. 

How Does It Affect My Credit File? Entering the agreement will be listed on your credit file, affecting it. However, there are ways to repair your credit. 

Entering into a Debt Agreement: To enter a debt agreement, complete a Part IX Debt Agreement Proposal detailing: 

• The administrator and how they will be paid. 
• If property will be sold, specify what will be sold and transferred. 
• Lodge the form with the Insolvency and Trustee Service Australia (ITSA). Creditors will meet to accept or decline your proposal. 

If accepted, the agreement binds the creditor, and they can’t take action against you for unsecured debts. The administrator pays the creditor on your behalf. 

If declined, you can re-submit your proposal with changes or consider a Personal Solvency Agreement (Part X) or filing for bankruptcy. 

If circumstances change, you can apply to have the agreement varied. 

Impact on Income: In most cases, you can keep your job, and your income remains unaffected. However, you need to live by a reasonable budget. 

Breaking the Debt Agreement: The agreement is terminated if broken, and your only options are filing for bankruptcy or a Personal Insolvency Agreement. 

When Does the Agreement End? You’ll be discharged when you fulfill your obligations or if you breach the agreement. 

Benefits of a Debt Agreement: Facing overwhelming bills? A debt agreement is an excellent solution with many benefits: 

• Once accepted, creditors can’t recover more debts from you. 
• Interest on your loans/credit is frozen. 
• No restrictions imposed during bankruptcy. 
• You can maintain your income. 
• Reduce stress and financial burden. 
• Continue maintaining your income in some circumstances.