Frequently Asked Questions (FAQs)
What is a Debt Agreement?
A Debt Agreement is binding agreement between you and your creditors where they agree to accept a sum of money which you can afford. Debt agreements can be for business or personal.
How will a Debt Agreement help me?
It will allow you to deal with unmanageable debts by freezing your provable unsecured debts and any Interest so you can repay your creditors over an extended period of time in an affordable and practical way. Use a debt agreement calculator to view repayments based on affordability.
What are unsecured debts?
Unsecured debts are debts which have NO security attached to them. This includes personal loans, credit cards, bills, tax debts. A Home Loan or a Car Loan ARE NOT unsecured debts.
Do I have to disclose all Debts?
Yes, all Debts have to be disclosed this includes both you secured debts, unsecured provable debts, leases, hire purchases and any rentals. A Debt Agreement will only deal with unsecured provable debts.
Do I have to disclose all my Income?
Yes, all income that you receive such as all paid employment, CentreLink, Child Support, income from investments and any interest earned. All debt agreement income limits must be disclosed.
Who can propose a Debt Agreement?
- You can propose a Debt Agreement if you are Insolvent
(you cannot pay your Debts as they fall due).
- Have not been Bankrupt or had a Debt Agreement, or been party to a
Part X of the bankruptcy Act in the past 10 years.
- Have Unsecured Debts, Assets and after Tax Income for the next
12 months all less than the threshold limits
Will I be bankrupt if I propose a Debt Agreement?
No, a Debt Agreement is the alternate to bankruptcy. However doing a Debt Agreement means you commit an act of bankruptcy.
What are the consequences of doing a Debt Agreement?
- You commit an Act of Bankruptcy.
- Your name will appear on the National Personal Insolvency Index
which is a public record.
- Listed with credit reporting agencies for up to 7 years which will affect
your ability to obtain credit.
- Secured Creditors (e.g. Car Loan) may sell your assets
(e.g. Car) if you default on payments to them.
- You cannot obtain credit solely or jointly without disclosing that you are
party to a Debt Agreement.
- You cannot carry on business under an assumed name without disclosing
to all people you deal with that you are party to a Debt Agreement
Can my creditors reject my Debt Agreement Proposal?
Yes, creditors have the right to reject your Debt Agreement Proposal. It is important to make a full disclosure of your current Income, Debts and Asset. There is no guarantee that creditors will accept your proposal.
What happens if my proposal is rejected?
If your Debt Agreement is rejected, it is possible to resubmit a new proposal. Usually creditors will consider a possible resubmission if additional information comes to light or there is added benefits to creditors to reconsider a new proposal.
How does my Debt Agreement get accepted?
Your Debt Agreement Proposal gets accepted if the majority dollar value of creditor’s votes is in favour of you Debt Agreement Proposal. This means that over 50.01% of the dollar value vote in favour of the Debt Agreement proposal.
What is the process of doing a Debt Agreement?
- Must read the prescribed information along with this frequently asked
question and Debt Agreement Pamphlet and understand the alternatives with
dealing with your debts.
- The Debt Agreement is lodged with AFSA (Australian Financial Security
Authority; a government department).
- AFSA sends your proposal to creditors for voting.
- Creditors vote on your proposal within 35 working days of AFSA accepting
- AFSA checks and counts the votes and the outcome is notified to you in
writing of the outcome.
Does AFSA have to accept my proposal?
No, the AFSA can reject your proposal if they believe that a Debt Agreement is not the best option for you, in the best interest of your creditors or find you ineligible to lodge a Debt Agreement.