Debt Agreement Frequently Asked Questions

Fact Sheet

Debt Agreements were introduced in 1996 as a low cost alternative to bankruptcy for consumers on a low income with little property. Since this time, the number of debt agreements has gradually increased as a people with debt issues look for bankruptcy alternatives.

We have answered the most frequently asked questions about Debt Agreements, however if there is you have any other questions, please don't hesitate to give us a call on our hotline, on 1300 138 188.

1. What is a Debt Agreement?

A Part IX Debt Agreement is a legally binding agreement between a debtor and their creditors. Debt Agreements are a flexible alternative to bankruptcy.

2. What does a debt agreement do?

Once accepted by creditors, a Debt Agreements "freezes" provable unsecured debts.

This means you can settle the debts over a short period of time, at an affordable amount per week. Examples of unsecured debts are medical bills, store cards, credit cards and some personal loans.

3. Is a debt agreement the same as going bankrupt?

No, a Debt Agreement is an alternative to bankruptcy.

4. Will I be able to make one payment per week to all my unsecured creditors?

Yes, we will set up a weekly payment system by way of direct bank debit.

5. Who can enter into a Part IX Debt Agreement?

A debt agreement can be entered into by people who are unable to pay debts as and when they fall due. A Debt Agreement can be proposed by a debtor who has:

• Not been bankrupt or in a debt agreement or similar in the last 10 years;
• Has an after tax income of less than $66,284.40; and
• Unsecured debts of less than $88,379.20.

6. What is the process?

Step 1: We assess your situation and make sure that a Debt Agreement is an affordable and appropriate solution

Step 2: Your application is lodged with ITSA (the Government department that regulates the scheme).

Step 3: ITSA records your application and notifies your creditors and request they vote on the proposal. During the voting period, creditors cannot demand payment from you or commence / continue legal action against you.

Step 4: Creditors assess the proposal and vote

Step 5: ITSA checks and counts the votes. If a majority (in value) votes in favour of your Debt Agreement, all creditors bound ¨C even those who voted against the Debt Agreement

7. Can you guarantee that my creditors will accept my debt agreement proposal?

It is your creditors who decide whether they accept or reject your proposal. However as a debtor your responsibility is to make full and complete disclosure of your financial position; put forward the best offer your can and commit to complying with the terms of the proposal.

8. Will a Debt Agreement affect my credit rating?

Both the debt agreement proposal and the debt agreement are registered on the National Personal Insolvency Index (NPII). Veda Advantage, the credit-reporting agency uses the information on the NPII to advise any creditors that you are under a debt agreement and/or have submitted a debt agreement.

9. How long does it take?

Once ITSA has accepted your debt agreement proposal for processing, creditors may vote to either accept or reject your proposal within 25 working days.

10. Should I continue to talk with my creditors?

Your relationship with your creditors is important and by talking with them you can explain to them your situation and ask them to support your debt agreement proposal.

You may also forward their contact details to us and we will talk with them on your behalf.

11. What happens if my creditors reject my Debt Agreement proposal?

Should creditors reject your proposal then we may be able to resubmit. However this will depend on your creditors and the reasons why they rejected your proposal. Should this happen we will contact you to work out a solution.

However if creditors reject your proposal your debts are revived. This means that creditors can pursue you for payment and any interest accrued during the 25-day period.

12. What if I want to get out of or change a Debt Agreement?

You can change or end a Debt Agreement if a majority (in value) of your creditors agrees to this. It is possible to obtain a court order to get out of the Debt Agreement but you should seek legal advice before considering this option.

Three important facts about Debt Agreements;

• 1. Creditor's debts are fixed at the date the proposal in entered with ITSA.
• 2. Creditors cannot charge you any more interest on these debts.
• 3. Creditors cannot take or continue action against the debtor to collect their debts.

We can offer a range of debt solutions to best suit your circumstances. Here are the various solutions available you: