Debt Agreements are for when you do not need the absolute protection of bankruptcy but are swamped with debt and need assistance.
With a Debt Agreement, your creditors agree to your debt being reduced to an interest-free amount you can afford. You have a fixed amount to pay to your Debt Agreement Administrator by regular monthly or fortnightly payments fixed for either three or five years. Once these monies are paid your Debt Agreement is finalised and you are permanently released from those debts.
Your Debt Agreement will have a Debt Agreement Administrator. You will make your payments to your Debt Agreement Administrator’s trust bank account and your Debt Agreement Administrator will then make pro-rata payments to your creditors, most likely at three-monthly intervals.
The aim of a Debt Agreement is to rejig your debts to create the opportunity for you to pay what you can afford and extract yourself from the financial pressures you are experiencing. This is done by stopping interest and fees from being charged and reducing the amount you are required to pay for the settlement of your debts. This gives you the opportunity to get back on top of your finances, pay the reduced amount, finalise your Debt Agreement, and be released from the debts.
Below are quick answers to questions commonly asked:
Superannuation and Debt Agreements
To qualify for a Debt Agreement your after-tax income cannot exceed $92,683.50. This amount does not include Statutory Super that is paid by your employer to your Super Fund.
Funds held in your Super Fund are protected and are not involved in your Debt Agreement. Whilst you are in a Debt Agreement, your employer continues to pay your Statutory Super entitlement to your approved Super Fund.
Your Car and a Debt Agreement
A Debt Agreement that does not involve your car will have no impact on your car. You will be free to do as you wish with your car. If you would like to swap it for a different car, you can.
If your car is subject to finance, you will need to continue making the lease or higher purchase payments if you wish to continue using the car. If you do not wish to keep using the car you can surrender it to the lender and any shortfall will be caught by your Debt Agreement. If this is your situation you will need to disclose the expected shortfall on the car in your Debt Agreement Proposal.
Household Furniture & Effects and a Debt Agreement
A Debt Agreement will have no impact on your household furniture and effects.
If you rent or are buying some items on hire purchase, you will need to continue making the lease or higher purchase payments if you wish to continue using those items. If you do not wish to keep using the household items, you can surrender them to the lender and any shortfall will be caught by your Debt Agreement. If this is your situation you will need to disclose the expected shortfall on your household items in your Debt Agreement Proposal.
Your Bank Account and a Debt Agreement
Your bank account is yours and has nothing to do with your Debt Agreement.
Whilst in a Debt Agreement you can close and open bank accounts without the involvement of your Debt Agreement Administrator.
Your Credit Record and a Debt Agreement
Your Debt Agreement will be shown on your credit record for 5 years.
Credit Cards, After Pay Companies, and Debt Agreements
Monies you owe on credit cards and after-pay will be caught by your Debt Agreement.
If you wish to keep using a credit card or after-pay facility, you will need to talk to the companies you have them with to see if they are agreeable.
Tax Debt and Debt Agreements
Monies you owe the ATO for taxes and former employee Statutory super contributions will be caught by your Debt Agreement.
Business Debts and Debt Agreements
Monies you owe for business debt and personal guarantee debt will be caught by your Debt Agreement.
Employee Entitlements and Debt Agreements
Monies you owe for employee entitlements will be caught by your Debt Agreement.
Life Assurance Policies and Debt Agreements
You continue to be able to have a Life Assurance Policy while subject to a Debt Agreement.
Your Passport, Overseas Travel, and Debt Agreements
During your Debt Agreement, you continue to hold your passport and remain able to travel overseas as you wish.
Your Home and a Debt Agreement
If you are buying your home a Debt Agreement can be used to protect and save your home – using the Debt Agreement payment arrangement to address creditor’s debts and protect the equity in your home.