Debt Agreements and Part IX

A debt agreement is a proposal by a debtor to their creditors to repay their debts at a rate that they can afford in their circumstances. A debt agreement, once accepted by creditors, is a legally binding agreement between a debtor and their creditors. Debt agreements are a flexible alternative to bankruptcy. Although entering a debt agreement is an Act of bankruptcy the debtor is not recorded as a Bankrupt. However most of the restrictions applying to bankrupts do not apply to persons entering a Debt agreement.

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Benefits of a Debt Agreement

  • All unsecured debts frozen
  • No more dealing with debt collectors
  • No more stress or worrying
  • No more interest or late fees or other penalties
  • One regular payment to cover all your unsecured debts

A debt agreement, once accepted by creditors, is a legally binding agreement between a debtor and their creditors. Debt agreements are a flexible alternative to bankruptcy. Although entering a debt agreement is an Act of bankruptcy the debtor is not recorded as a Bankrupt. The Benefits of a debt agreement are generally freezing the debt and eliminating any further interest payments on your debt and gaining protections offered by the bankruptcy Act. The downside is that your name will be on a commercial credit report and the NPII ( ie. The Government record at AFSA.) for 5 years, or longer in some circumstances.

Who Can Do A Debt Agreement

To be eligible to do a debt agreement you must meet the following criteria. These amounts are indexed by AFSA twice yearly in March and September.

  1. You must be insolvent. That means you are overdue with your payments and unable to meet your debts as and when they fall due.
  2. Your net assets (defined as divisible assets if you were a bankrupt) do not exceed $114,478 as at 20/9/2018. See Current Limits.
  3. Your unsecured debts do not exceed $114,478 as at 20/9/2018. See Current Limits.
  4. You cannot do a debt agreement if you have been bankrupt or in a part ix or part x within the last ten years.
  5. Your income needs to be less than $85,858.50 after tax (or $1651.13 a week). See Current Limits.

Proposals may include various arrangements to suit the debtors circumstances:

  • Periodic payments of amounts out of the debtor’s income
  • Lump sum payment with or without a periodic payment
  • A moratorium on payment of debts combined with any of the other arrangements measured
  • Payment from the proceeds of sale of property owned by the debtor

A debt agreement proposal needs to be in the approved forms:

  • Debt Agreement Proposal – outlines what the proposal offer is in dollar terms;
  • Explanatory Statement – informs the creditors about their income, expenses, assets and debts, personal circumstances, household expenses and the reasons for financial difficulty;
  • Statement of Affairs – sets out in detail their personal information and circumstances, reasons for financial difficulty, sources of income, assets and debts. The completed form is not sent to creditors however a debtor or an affected creditor may inspect the SOA and obtain a copy of it.

A certificate signed by the administrator must accompany debt agreements lodged by an administrator. The administrator will also require you to read and sign a copy of the prescribed information.

Debt Agreement Procedure


The debtor must read the Prescribed Information about the alternatives and consequences of bankruptcy and debt agreements. We will discuss these with you and explain your options.

Proposal is Prepared and Lodged

Complete your Debt Agreement with the best offer you can make and explain your reasons for making the proposal. Send to AFSA the following documents: a debt agreement proposal; an explanatory statement; and a Statement of Affairs. They must be received by AFSA within 14 days of being signed.

As your Administrator we will consent to act as your administrator and sign the Certificate by the Administrator.

AFSA Registration of your Debt Agreement

Once lodged, your proposal will be registered on the NPII and you will receive a letter in the mail from AFSA confirming registration of your Debt Agreement. The letter will confirm your Administration Number. It is normally like this. QLD 1234/5/6. If you are contacted by creditors please quote this number to them and advise them to contact us on 03 9525 1087.

Proposal is sent to Creditors to Assess and Vote On

AFSA sends the proposal and explanatory statement to creditors, asking them to detail their debts and to vote on the proposal. Creditors then assess the proposal and vote. Any questions are referred to the debt agreement administrator. For a proposal to be accepted, AFSA must receive ‘yes’ votes from a majority in value of the creditors who vote.

If the proposal is accepted by creditors the debt agreement administrator is responsible for:

  • collecting payments from the debtor
  • keeping creditors and debtors informed
  • paying dividends to creditors
  • telling AFSA when the debt agreement is completed.

If the proposal is not accepted by creditors:

  • it remains on the NPII and on the records of credit reference agencies
  • creditors are able to commence recovery action including for accrued interest.

Can a Debt Agreement be Varied?

A variation proposal may be lodged if the debtor’s circumstances have changed. Creditors vote on a proposal to vary in the same way as they vote on the original proposal. If it is not accepted by creditors, the terms of the debt agreement remain in force.

Can a Debt Agreement be Terminated?

A termination proposal may be lodged by the debtor or a creditor if the terms of the debt agreement are not being carried out.

Creditors vote on a proposal to vary in the same way as they vote on the original proposal. If it is not accepted by creditors, the terms of the debt agreement remain in force.

The agreement is automatically terminated if:

  • the debtor has not made any payments for six months after a payment is due, or
  • the debtor does not complete their payments within six months of the completion date of the agreement.

The effects of terminating a debt agreement include:

  • creditors can commence or recommence recovery action against the debtor, and
  • the termination of the debt agreement is registered on the NPII.

The debtor, a creditor or AFSA may apply to the court for an order to terminate a debt agreement. Creditors may apply for an order that the debtor be made bankrupt.

When Does a Debt Agreement End?

A debt agreement ends when:

  • the debtor has completed all their obligations and payments, or
  • the court orders the debt agreement be terminated or declared void, or
  • the debt agreement is terminated by creditors.

Fees charged by Debt Agreement Administrators

Set up fees

We charge between $880 and $1320 depending on the complexity and hence the extent of work involved in setting up the proposal. We also discount these amounts for seriously disadvantaged clients. Set up Fees are not paid upfront. They are paid progressively prior to your proposal being accepted by creditors. AFSA also requires a lodgement fee of $200 which we collect from you and pass on to AFSA.

Set up fees are charged by administrators for –

  • Providing information to debtors about the options to deal with their unmanageable debt and the consequences;
  • Consider the alternatives including, Informal agreements, Refinancing, Personal Insolvency Agreement (part X) and Bankruptcy.
  • Analyse debtors financial situation to seek opportunities to improve their financial circumstances
  • Preparing and lodging the debt agreement proposal forms with AFSA from information provided by the debtor.
  • Respond to creditors in relation to your debts prior to, during and after the debt agreement has been prepared and /or approved.
  • Stopping garnishees on wages.

Fees to administer the debt agreement

Our ongoing Administration fee is 22.73% plus GST. We do not recover any other expenses out of the Debt Agreement as we believe these are costs of doing the business. This fee covers all aspects of managing your debt agreement from start to finish.

The consequences of a debt agreement. See AFSA.

  • The debtor is not bankrupt.
  • All unsecured creditors are bound by the debt agreement and are paid in proportion to their debts.
  • The debtor is released from most unsecured debts when they complete all their obligations and payments.
  • Creditors cannot take any action against the debtor or property of the debtor to collect their unsecured debts entered into the debt agreement.
  • The agreement does not release another person from a debt jointly owed with the debtor.
  • A debtor must disclose that s/he is a party to a debt agreement if incurring debt or obtaining goods and services in excess of the threshold
  • If trading under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to all people dealing with the business.

Debt Assistance Debt Relief

If you need help with debt don’t hesitate to contact us or complete the online enquiry and we will contact you.

Debt Solutions to help you:

  • Save your house or car
  • Be debt-free in 30 to 60 months*
  • Reduce future interest
  • Stop the phone calls