Debt agreements, or even personal insolvency agreements, may be terms you have come across as you consider your options for bankruptcy but you aren’t really sure what the differences are and how they relate to bankruptcy. Bankruptcy Advisory Centre is here to clear up any misconceptions you have and advise which form of agreement may be better suited for your personal situation.
Debt agreements and Personal Insolvency Agreements offer a formal method of settling debt in a way that you can afford. Whilst both options are different from bankruptcy, they are still acts of bankruptcy, so it’s important to understand the benefits and consequences of all personal insolvency options. This way you’ll be able to make an informed decision about the best way to solve your debt problems.
What Is A Part 9 Debt Agreement?
A Debt agreement (Part IX/9 of the Bankruptcy Act) is when an individual who is insolvent, enters into a formal agreement with creditors. This becomes a legally binding agreement between you and your creditors, where you negotiate to repay a percentage of your unsecured debt back; generally over a 3 to 5 year period.
A part 9 debt agreement is aimed at lower level debts often associated with consumer liabilities.
Who Will Manage It?
Only a registered bankruptcy trustee, registered agreement administrator, or the official trustee can administer the agreement.
This is because such types of proposals can be complex. The process involves many steps and a high degree of experience and skill is needed to set it up and further administer it.
What Does It Cost?
There are various fees involved when it comes to agreements and they often vary between administrators and trustees.
- A set-up fee by the administrator or trustee – this fee relates to the cost of putting your proposal together
- AFSA lodgement fee – a fee that the Federal government charge for lodging your proposal
- Administration Fee – a fee that your trustee or agreement administrator will charge for administering your agreement if, and once it’s accepted by your creditors
- AFSA Realisations Charge – a levy which is charged by the Federal government if and when your proposal is accepted and it relates to the cost of conducting enquiries, investigations, monitoring and the regulation of trustees and agreement administrators
What Are The Consequences of Having A Part 9 Debt Agreement?
A debt agreement is still an act of bankruptcy, so just like bankruptcy and personal insolvency agreements, there will be a listing on your credit report for 5 years. The government will also keep a record of your debt agreement on the National Personal Insolvency Index (NPII).
If you’re self-employed and trade under a business name that’s not your personal name, you’ll need to disclose your agreement to all people you do business with. You’re also unable to apply for goods or services on credit, cheque or hire purchase above a set amount without disclosing that you are currently in an agreement.
By committing an act of bankruptcy, a creditor can apply to the court to make you bankrupt if your agreement fails.
Am I Eligible?
- Your after-tax income doesn’t exceed a certain amount.
- Your unsecured debts and assets don’t exceed a certain amount.
- You haven’t been undischarged from bankruptcy, a personal insolvency agreement (Part X/10) or a debt agreement (Part IX/9) in the last 10 years
- You are insolvent, that is; you’re unable to pay your debts as and when they fall due
Is A Part 9 Debt Agreement Right For Me?
It’s never too early to seek expert advice.
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
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