Debt Agreements As A Government Legislated Option
When you are in above your depths in serious debt, there are many debt solutions available, some of which are Government legislated. The Bankruptcy Act 1966 was introduced to legislate the bankruptcy process, and provide alternatives for people to use in certain cases of insolvency. Of these alternatives, the most well used are Part IX and Part X debt agreements.
Government Legislated Debt Agreements
Debt Agreements are a legally binding government legislated agreement that provides an option for debtors who cannot keep up repayments. An agreement is made between you and your creditors to pay back what you can afford, at a rate that you can afford it. This often means paying back less than what you owe. Once you have completed the obligation of payments under the debt agreement, you are released from the rest of your debt.
Creditors do not have to accept your debt agreement, but if the majority do accept then the new terms are legally binding under the Bankruptcy Act 1966. For this reason, if you are eligible, and the terms are accepted by your debtors, you will find that the agreement must be kept by all parties, and that failure to do so will result in court action.
This provides extra security for you, allowing you to rely on the debt agreement. As the agreement is government legislated, the debtor has much more security than they would do in a private or informal arrangement. You should also be aware, however, that this also leaves you vulnerable should you fail to keep up with the new terms. In this case, your creditors can take legal action, and this usually leaves you with only one viable option; bankruptcy.
Eligibility For Government Legislated Debt Agreement
There are certain factors at play when it comes to your eligibility for government legislated debt agreements. You are eligible for a debt agreement if:
- You are insolvent, i.e. are unable to pay your debts as they fall.
- You have not had a debt agreement, or declared bankruptcy in the last 10 years.
- You have less than the indexed amount of debt, assets, and income for the next 12 months.
- You pay the fee required for lodging a debt agreement.
National Personal Insolvency Agreement
It is generally agreed that in most cases a debt agreement is preferred over bankruptcy, if the option is available given the eligibility, and the fact that creditors have to agree to the terms. A debt agreement is not considered bankruptcy, but is an ‘act of bankruptcy’ under the Bankruptcy Act 1966. Though the consequences are less drastic, it is worth understanding that a debt agreement still has a long term impact on your credit rating, and that your name, and some personal details, will be recorded on the National Insolvency Index.