What Is A Debt Agreement?
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In debt? A debt agreement might be the solution to your problem!
What is a debt agreement?
A debt agreement is a negotiated solution worked out with your creditors. Once agreed to it becomes legally binding on both parties.
All your unsecured debt is put into the one ‘basket’. These could include credit cards, some personal loans, overdrawn bank accounts, store credit cards, old utility and phone/mobile bills, and outstanding school and childcare fees.
A debt agreement allows you to reduce your repayments to your creditors according to what you can afford. You have a repayment schedule by way of a single weekly direct bank debit.
The amount that you and your creditors agree you can’t afford to repay is written off.
The agreement may include the transfer of property from you to one or more of your creditors in full or part payment.
From the time of the agreement, interest charges are frozen, and creditors contact with you and legal action against you are stopped.
Are you eligible to propose a debt agreement?
You are eligible to propose a debt agreement if you:
- are insolvent
- have not been bankrupt, utilised a debt agreement or given an authority under Part X of the Bankruptcy Act in the last 10 years;
- have an after tax income of less than $69,000** pa approximately
- have unsecured debts of less than $92,000** approximately
- have property of less than $92,000** approximately
** These limits are updated twice a year.
What does insolvent mean?
You are said to be insolvent if you cannot pay your debts as and when they fall due.
Is a debt agreement the same as going bankrupt?
NO, entering into a debt agreement is an alternative to going bankrupt.
However by submitting a debt agreement proposal you are committing “an act of bankruptcy”.
Do all my creditors have to agree to my proposal?
No. The majority of the dollar amount of those creditors who decide to vote, and are entitled to vote, have to agree to your proposal.