FAQ's: Debt Agreements

The following FAQs concerning debt agreements will assist you in understanding it as a debt solution alternative. These questions and the responses are based upon AFS' significant experience in providing solutions to people in debt.

Remember that there are alternatives to bankruptcy. So consider the FAQs then contact us at AFS to receive our free and confidential advice, and discuss the debt solution that best suits you.

What is a Debt Agreement?

Click here to be taken directly to our information page that explains what a Debt Agreement is all about.

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Why would my creditors want to accept my Debt Agreement proposal?

The benefit to creditors is usually related to the fact that the likely return under the Debt Agreement proposal will exceed the likely return under a bankruptcy scenario (or Part X agreement), and the costs of a Court process that would otherwise be incurred in a bankruptcy scenario can be avoided. 

Creditors may also give weight to the fact that you are making a genuine effort to repay the maximum you can afford in the circumstances. 

A Debt Agreement is administered by a Debt Agreement Administrator, which is one of the services that we offer at AFS.  Creditors will have an increased level of confidence as to the completeness of the information they receive, upon which to base their decision as to whether to approve your proposal, and the independence of the process, with the involvement of an administrator like AFS. 

 

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Do I meet the qualifying criteria to propose a Debt Agreement to my creditors?

To be eligible for a Debt Agreement you must be unable to meet your debts as and when they fall due, and you must not have been bankrupt, had a debt agreement or proposed a Part X (personal insolvency agreement) within the previous ten (10) years.

In addition you must also meet the following qualifying criteria:

  • Have an income of less than $61,875.45(after tax); and
  • Have unsecured debts of less than $82,500.60; and
  • Have divisible assets available to creditors of less than $82,500.60.

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What are the advantages to me of proposing a Debt Agreement to my creditors?

There are several advantages in proposing a Debt Agreement to your creditors.  Once approved a Debt Agreement will avoid bankruptcy, and many of the restrictions that go with bankruptcy, which will be the main benefit to you.   

Other benefits include the fact that you will have clearer and affordable future commitments with out the constant threats from creditors that are owed money.  You will also avoid the Court process associated with bankruptcy, the opportunity to be released from your debts upon completion and the freezing of debts and interest.

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What is a Debt Agreement proposal likely to involve?

The proposal may involve you making monthly payments to repay creditors over a longer period of time (say 3 to 5 years) in a situation where interest charges are stopped and may involve you paying less than 100% of the debt due to your creditors.  AFS works with its clients to determine the proposal that best fits with their personal circumstances.  AFS can assist you too.

Once your Debt Agreement proposal is developed and supported by the relevant information, your proposal is circulated to your creditors for approval.

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What types of things will AFS help me with in proposing a Debt Agreement?

AFS will meet with you to develop a household budget, identify and list your assets and liabilities and determine a reasonably sustainable amount that you can afford to repay to your creditors in the future. 

AFS can then assist you in completing the prescribed information forms that are required for lodgement and, if your proposal is approved by creditors, AFS can also act as your debt agreement administrator.

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Will my creditors keep chasing me for payment if I propose a Debt Agreement?

Once you have proposed a Debt Agreement, creditors can not take any further action against you or your assets until such time as your Debt Agreement is either rejected or comes to an end.  Where creditors have any questions on the Debt Agreement proposal, and AFS is acting as debt agreement administrator for you, we will address those questions with the creditor. 

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Do all of my creditors have to approve the Debt Agreement for it to be effective?

A Debt Agreement proposal is only required to be approved by a majority (in value) of your creditors and it then becomes binding on all of your creditors.  Once approved you will only be responsible for making the repayments to which you have agreed in the debt agreement.

Your Debt Agreement will not affect the rights of any secured creditors you may have.

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Who will act as the Administrator of the Debt Agreement for me?

You can appoint AFS to act as your debt agreement administrator.

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Are all of my debts captured under a Debt Agreement?

When the terms of the Debt Agreement are completed you are released from your debts and creditors will write off the balance of the debt owing to them.  There are certain debts that are not dealt with by a Debt Agreement and these typically remain payable and include Court penalties and fines, parking and traffic fines, certain damages from accidents, student assistance loans, child support, other maintenance debts and HECS debts.

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When will the Debt Agreement end?

A Debt Agreement will end when you have met all of your obligations under the agreement, unless the debt agreement is terminated earlier on application of a creditor or by the Court.

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Will my credit rating be affected?

When your proposal is first accepted for processing your details will be added on the National Personal Insolvency Index (NPII).   This will affect your credit rating, although if you have had difficulty in repaying your debts your credit rating may already be affected.

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What should I do now?

Taking action is the key to regaining control and releasing the pressure.  Contact us now at AFS and we will help you on the path to financial freedom.

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