DEBT AGREEMENT
Q 1. What is a Debt Agreement?
Q 2. Can anyone enter into a debt agreement?
Q 3. How does a debt agreement work?
Q 4. What happens if creditors do not accept my proposal?
Q 5. What happens if creditors accept my proposal?
Q 6. What will happen if I do not honour the terms of my agreement?
Q 7. What are the advantages of a debt agreement?
Q 8. What are the disadvantages of a debt agreement?
Q 9. What is the difference between a bankruptcy and a debt agreement
Q10. If my circumstances change, can I change my debt agreement?
Q11. What happens when I complete the terms of my debt agreement?
Q12. What does it cost to put forward a debt agreement proposal?
Q13. Where can I go to get more information?
- A debt agreement is a process where you negotiate generally through an administrator, a formal binding agreement with creditors.
- Payment can be less than 100 cents in the dollar
- Creditors may accept a moratorium on payment of debts
- Property can be sold to pay creditors
- Periodic payments can be made over a period of time (usually no more than 4 years)
Q2. Can anyone enter into a debt agreement?
- No; there are some limitations as set out below;
- You must not have been a bankrupt or entered into a debt agreement, or signed an authority under Part X of the Bankruptcy Act within the past 10 years.
- Your after tax income must be less than the Current Amount
- Your unsecured debts and any potential shortfalls on secured debts must be less than the Current Amount
- Your divisible property must be less than the Current Amount
- You must be insolvent, that is you cannot pay your debts as and when they become due
If some of these limitations apply, you may wish to consider a Personal Insolvency Agreement.
Even if you meet these criteria, in certain circumstances a Personal Insolvency Agreement may be more beneficial.
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Q3. How does a debt agreement work?
- You will be required to complete a statement of your affairs and a debt agreement proposal in consultation with a debt agreement administrator. Ie. G T Lean & Associates.
- Once all the forms have been processed creditors are required to vote upon the proposal put to them and if accepted by your creditors within a specified time frame all creditors are thereby bound by the Agreement.
Q4. What happens if creditors do not accept my proposal?
- You can submit a new and more favorable proposal, based on creditor feedback.
- You may wish to consider other options;
- A Part X, personal insolvency agreement.
- Bankruptcy.
Q5. What happens if creditors accept my proposal?
- A successful agreement binds all unsecured creditors and no further recovery action can be taken against you by creditors.
- Creditors will be advised by your administrator.
Q6. What will happen if I do not honour the terms of my agreement?
- If you do not comply with the term of your debt agreement, it will be terminated and in which case you may have to consider bankruptcy or a Personal Insolvency Agreement.
Q7. What are the advantages of a debt agreement?
- Once you put forward a debt agreement proposal, recovery action and interest by creditors is frozen during the voting period and if accepted, creditors cannot commence or proceed with recovery action against you.
- The rights of secured creditors are not affected by a debt agreement and they can repossess property if you default with loan repayments.
- Your debts are consolidated and you are only required to make payments to your administrator/Trustee thereby releasing the pressure to make individual payments to each creditor.
- The restrictions of bankruptcy do not apply.
- Personal satisfaction in having repaid your debts.
Q8. What are the disadvantages of a debt agreement?
- Your name and some personal details will be recorded on a national Commonwealth Government data base (National Personal Insolvency Index - NPII) and will remain on this data base indefinitely.
- The NPII is a public record (held by ITSA) and it can be accessed (on the payment of a fee) by any person or organisation.
- Your name and some personal details will be recorded on various credit reference agencies data bases and will remain there for seven years.
- You may have some difficulty in obtaining credit during the term of the debt agreement .
Q9. What is the difference between a bankruptcy and a debt agreement?
- There are minimal restrictions on employment, borrowing funds, acquiring property or travel under a debt agreement.
- If you are bankrupt, you cannot hold certain licenses, there are restriction on employment, you may be required to pay part of your income to the Trustee, you must obtain the Trustee’s permission to travel overseas, some of your divisible property may be sold and any divisible property you acquire during bankruptcy, vests in your Trustee and you are limited to obtaining credit.
Q10. If my circumstances change, can I change my debt agreement?
- Yes, you can put forward a variation proposal, which creditors must vote on. If accepted the varied proposal is binding an all creditors.
Q11. What happens when I complete the terms of my debt agreement?
- Notification will be received from ITSA and a Certificate of Compliance will be issued if requested from them for a fee (currently $22.00) The various Commonwealth Government and private data bases will be updated.
- Your obligations under the debt agreement come to an end.
Q12. What does it cost to put forward a debt agreement proposal?
- This will depend on the administrator, as there are some who do charge an upfront fee, but G T Lean and Associates does not. A monthly administration fee is charged only when the proposal is accepted, which varies with the level of debt, but you will be informed of this prior to signing any documentation. As from the 1st July 2007 3.5% of all funds received must be paid to the Commonwealth Government.
Q13. Where can I go to get more information?
You can contact Lynne Brookes or Ross Thomson at G T Lean & Associates on:
1800 738 353 Freecall
(08) 9227 8353 (WA office hours)
e-mail mail@bankruptcyadvice.com.au
complete and submit the enquiry form