Debt Relief is the process of having all or some of your debt forgiven. In Australia there are a couple of ways this can happen in a variety of ways, bankruptcy Part 9 Debt Agreements and Personal Insolvency Agreements. Increasing numbers of people are accessing debt relief options in Australia. In 2017 record numbers of people applied for a debt agreement.
The Debt Agreement
A debt agreement utilises section 9 of the Bankruptcy Act. A RDAA (Registered Debt Agreement Administrator) will review your income and expenses and determine what payment you can afford to repay. That payment will form the basis of a “debt agreement” which is sent to creditors for their approval. Creditors vote on whether or not to accept the agreement. The creditors also agree to the percentage of the payments that your RDAA will receive as their fee.
After the debt agreement is lodged with AFSA and the Debt Agreement Number is issued, affected creditors can no longer charge interest, fees or other charges. After the agreement is approved you will make one regular payment to your RDAA who will distribute the funds to your creditors.
The Debt Agreement is recorded on your credit history and the NPII for 5 years (or 2 years after its terminated whichever is longer). You also are required to notify creditors you are applying for credit with, over a certain amount that you are in a Debt Agreement. There are also certain professions that have restrictions in place for insolvent people.
The Personal Insolvency Agreement
A PIA (Personal Insolvency Agreement) is similar to a Debt Agreement however there are no assets or debt restriction for entering one. There is a lot more involved in a PIA. A Statement of Affairs is completed and a Controlling Trustee is appointed. The Controlling Trustee will take “control” of your assets and investigate your financial affairs in order to report to creditors. The Controlling Trustee will then issue a report to creditors and call a meeting. At that meeting an offer will be made to creditors and they will vote on whether or not they want to accept the agreement.
If the agreement is accepted by creditors a Managing Trustee is appointed to administer the terms of the agreement. You will make payments into a trust account and the trustee will at regular intervals make a dividend payment to the creditors in the agreement. At the conclusion of the payments you are discharged from your agreement all obligations to your creditors.
The Personal Insolvency Agreement is recorded on your credit history for 5 years and on the NPII forever. There are also certain professions that have restrictions in place for insolvent people.
Bankruptcy is the most severe form of debt relief. When you file for bankruptcy you are released from all of your debts. When you submit your Statement of Affairs a Trustee is appointed to manage your financial affairs for a period of 3 years, or longer if you don’t comply with the Trustee’s directions. The Trustee will only concern themselves with significant assets and income over a threshold. Travel will also be restricted for the bankruptcy period.
The Bankruptcy is recorded on your credit history for 5 years and on the NPII forever. There are also certain professions that have restrictions in place for insolvent people.
If you’re looking for relief from your debts and would like to talk to someone who can help you discover all the options available to you to become debt free as soon as possible, we have professional consultants available 7 days a week; you can talk to a real person about your situation from the privacy of your own home.
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