If you can’t afford your existing repayments but could afford some repayment a debt agreement is a great option. It allows for a permanent reduction in payments to creditors based on what you can afford.
Debt Agreement Summary
- Debt Agreements put all of your individual debts into one “pool” of debt. These debts need to be unsecured debts, e.g. Credit Cards, Personal Loans, Overdrawn Bank Accounts, Store Cards, Repossessed Cars, old Electricity/Gas Accounts (previous addresses), disconnected Telephone/Mobile Accounts, School Fees, Childcare Fees, old Pay TV Accounts, etc.
- You make one easy, affordable weekly, fortnightly, or monthly payment that covers the Debt Agreement.
- Legally creditors must stop contacting you and any legal action is stopped, including bankruptcy.
- Interest charges and penalty fees are frozen.
- What you can’t afford to pay is potentially written off.
Debt Agreement Criteria
There are a number of criteria you need to meet to enter into a Debt Agreement.
- Take-home pay (after tax income) of less than approximately $1,487.32 per week.
- Unsecured debts cannot exceed $103,121.20
- Cannot have assets of more than $103,121.20
- Cannot have been an undischarged bankrupt nor had a Debt Agreement in place over the last 10 years.
- A debtor who proposes a debt agreement commits an act of bankruptcy. A creditor can use this to apply to court to make the debtor bankrupt if the proposal is not accepted by creditors.
- The debtor’s name and other details appear on the National Personal Insolvency Index (NPII) at the point of lodgement of the proposal, a public record of bankruptcy, personal insolvency agreement and other insolvency matters, .
- The ability of the debtor to obtain further credit is affected. Details may also appear on a credit reporting organisation’s records for 5 years, or until the debt agreement is completed whichever is longer. If the debt agreement is terminated it will be recorded for 5 years or 2 years after the termination, whichever is longer.
- During the voting period creditors cannot take debt recovery action or enforce a remedy against the debtor or the debtor’s property; and must suspend deductions by garnishee on debtor’s income.
- The debtor is not bankrupt.
- All unsecured creditors are bound by the debt agreement and are paid in proportion to their debts.
- The debtor is released from most unsecured debts when they complete all their obligations and payments.
- Secured creditors may seize and sell any assets (eg a house) which the debtor has offered as security for credit if the debtor is in default.
- Creditors cannot take any action against the debtor or property of the debtor to collect their debts.
- The agreement does not release another person from a debt jointly owed with the debtor.
- A debtor must disclose that s/he is a party to a debt agreement if incurring debt or obtaining goods and services in excess of the threshold
- If trading under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to all people dealing with the business
Contact Debt Mediators Australia today to find out more about Debt Agreements.
If you are able to make your payments as and when they fall due and are experiencing no difficulty repaying your loans debt consolidation may be a better option.