Debt Agreement | ezdsolutions

A Debt Agreement in its most simple terms.

A debt agreement is a debt settlement arrangement made between yourself and your creditors to settle your debts affordable. In reality it is a Government Approved Debt Agreement .

If a majority of your creditors (in value) agree to your settlement offer, interest is frozen and your affected creditors will not be able to take any fresh steps against you to recover their debts.

Debt agreements are an Australian Statutory Instrument specifically for those debtors who seek an option to deal with unmanageable debts as an alternative to bankruptcy.

The Australian Financial Security Authority (AFSA) is the government agency responsible for the regulation of the debt agreement scheme and its practitioners.

A debt agreement is an option available for debtors to deal with unmanageable debts and a flexible alternative to bankruptcy.

A debt agreement can only be entered if the debtor is insolvent, which means someone who is unable to pay his/her debts as and when they fall due.

A debt agreement can be entered if you have :

Not filed for bankruptcy, utilised a debt agreement or given an authority under section 188 of the Bankruptcy Act in the last 10 years;

An after tax income of less than $73,259.55;

Unsecured debts only of less than $97,679.40 (an unsecured debt is any debt that is not secured against an asset, e.g. property).

A Debt Agreement is a great option providing that you can maintain the payments. When working out how much you can afford it is important to consider all of your living expenses. It is pointless offering an amount you are unable to afford.

It now doesn't matter about your prior mistakes, it is important that we get this Debt Agreement right. It is what is going to get you out of debt so it must be put together with thought.

Remember you can offer whatever amount you wish. It is then up to your creditors to decide if they want to accept that offer or not. Beware however that it is not a negotiation festival.

You must offer the amount that you can most afford. You are not supposed to be trying to get away with it for as cheap as possible, whereby you risk your Debt Agreement being rejected by AFSA as not being acceptable.

The advantages of a Debt Agreement.

If you are considering a Debt Agreement then you are probably in a situation where your Debts are causing you misery and you don’t see any other way out, however there are benefits.

All interest and charges on your unsecured debts will be frozen.
Providing you keep to the terms of your arrangement, your creditors will not be able to pursue any further court action. They will also be prohibited from sending letters to you and telephoning you for the purpose of debt collection.
Once a Debt Agreement is succesfully completed your debts are effectively settled, providing you with a fresh start.
For anyone who does not wish to go bankrupt because of their job or the stigma of bankruptcy this can be an excellent option.
The Debt Agreement will bind most unsecured creditors.
Your contributions are based on your ability to pay.
You can keep your secured assets as long as you continue to pay for them.
Once there is an agreement in place, the amounts owed to creditors does not change.
A debt agreement can be constructed to suit the debtor. For instance, it may be possible to propose a moratorium, lump sum settlement or any other arrangement that creditors may consider suitable.

Disadvantages of a Debt Agreement are:

A Debt Agreement is an alternative to Bankruptcy, but as it comes under Part 9 of the Bankruptcy Act, proposing a Debt Agreement is considered an Act of Bankruptcy.

While this agreement is in place you will not be able to get any finance agreement approved.
You will even have difficulty entering into a mobile telephone contract.
Both the Debt Agreement Proposal and the Debt Agreement are registered on the National Personal Insolvency Index.
Once the agreement is paid in full, your credit file will be noted, you are now a discharged bankrupt. This remains on your credit file for five years.
Possible bankruptcy - Proposing a debt agreement, whether it is accepted or rejected by your creditors, is an act of bankruptcy. If you propose a debt agreement that is not accepted by your creditors, they can use the act of bankruptcy to apply to the court to make you bankrupt. Please come in and see us to ensure success of your proposal.

WHAT ARE THE

ADVANTAGES ?

How does the debt agreement process work ?

The Debt Agreement process.

Our Consultants at EZY Debt Solutions will help you understand how the Part 9 Agreement process works and it is important to helping you weigh up the advantages and disadvantages.

Here is a breakdown of the process:

Review the information.

After your first free consultation with one of our EZY Debt Solutions consultants we will finitely assess your circumstances and advise you on the best way of addressing your debt stress. You can further read and review independent information about the consequences of bankruptcy, debt agreements and the alternatives that are available. You can find this information on the Australian Financial Security Authority (AFSA)'s website prior to giving EZY Debt Solutions your approvals to help mediate with your creditors on your behalf.

Appointment of an administrator.

You do have the option of administering your own debt or if you find it daunting you can appoint EZY Debt Solutions to facilitate the debt agreement and mediate. If you decide for us to facilitate the appointment of an administrator you will be charged upfront and ongoing fees.

Debt arrangement proposal.

After you appoint EZY Debt Solutions we will facilitate an administrator and determine your insolvency and unmanageable debt and help you prepare a debt management proposal. This will outline the proposal offer in dollar terms. Separate forms will inform creditors about your financial position and set out your statement of affairs. Your debt arrangement proposal will then be lodged with the Official Receiver.

Your creditors will vote.

Following the receipt of the debt arrangement, your creditors will receive copies of the Official Receiver's Report and the Debt Arrangement Proposal. Creditors then vote on the proposal, generally within a period of five weeks. If the report is accepted by the majority of Creditors by 50.it becomes an agreement and recorded on the National Personal Insolvency Index (NPII); if it's rejected by the majority it will be recorded on the NPII and creditors can continue trying to recover debts from you; if it's cancelled by the Official Receiver the NPII is updated and creditors can commence or continue with action to recover their debts.

If your debt agreement is accepted.

We will help you comply with the debt agreement and complete it by the date listed on the proposal.

Is it the same as going Bankrupt?

No, although debt agreements are administrated in accordance with the Bankruptcy Act they are an alternative to bankruptcy. However by submitting a proposal you are committing "an act of bankruptcy".

What affect does a debt agreement have on my debts?

Upon entering into your debt agreement your unsecured debts are frozen. This means that no interest or charges can be applied to your unsecured debts whilst the debt agreement is in effect. This allows you to repay your debts over a specified term, usually 3 to 5 years, via weekly repayments based upon affordability. After successfully completing the terms of the debt agreement you will be released from all unsecured debts included in the agreement.

What are the alternatives to a Part 9 Agreement?

If you're unsure whether a debt agreement is right for you, you may want to consider other ways to take back control of your debt such as:

Unsecured personal loan.

Depending on how much debt you owe and the state of your credit history, you may be eligible for an unsecured personal loan. You can borrow upwards of $60,000 with an unsecured personal loan and consolidate debt from multiple credit accounts.

Balance transfer credit cards.

If the majority of your debt is on credit cards and you have good credit history, you may want to consider your balance transfer options. These cards let you transfer debt from multiple cards to one and pay no interest for an extended period of time.

What will I have to pay?

Set Up Fee

A set-up fee is charged for putting the Debt Agreement Proposal together and the work that is involved in doing so. This fee is $2200. However the maximum you will have to pay up front is $700. The balance of $1500 will be paid through the Debt Agreement and will receive the same rate of return as all other creditors.

AFSA Lodgement Fee

AFSA charges a Lodgement Fee for every Debt Agreement Proposal. This is a set amount of $200 and is payable every time a Proposal is lodged. This fee is not refundable and must be paid in full, in all circumstances. We will pay this expense on your behalf and recover it together with your Set Up Fee.

Administration Fee

An Administration Fee is charged by EZY Debt Solutions for administering your Debt Agreement over the term of your agreement. By law these fees must be expressed both as a dollar amount and as a percentage of the payments to be made by you once the Debt Agreement Proposal is accepted. Let’s look at an example of how this works.

Say for example you have unsecured debts totalling $35,000 and you can afford to offer your creditors $125 a week for 260 weeks which is $32,500. If your creditors accept your proposals then they also appoint us to administer your Debt Agreement and in doing so they agree to allow us to retain a portion of what you pay back for the work of administering the agreement. The amount we retain is taken from the $32,500 and it is not an additional amount or fee paid by you.

Realisations Charge

This is a levy charged by AFSA to fund the cost of conducting enquiries, investigating alleged offence, monitoring and regulating trustees and administrators and providing information to a range of clients. This fee is only charged when and if your Debt Agreement Proposal is accepted by your creditors. It is currently charged at 7% of the money received by the administrator of your Debt Agreement, and as with the Administration Fee (see above); this amount is calculated based on the amount of money being paid in your Proposal.

Do I get a refund if creditors reject my Debt Agreement Proposal?

If AFSA rejects your proposal for processing because you did not include all necessary material information your AFSA Lodgement Fee will not be refunded and nor will your Set Up Fee. If Creditors reject your Debt Agreement Proposal your Set Up Fee will not be refunded. Should AFSA reject your proposal for processing because of an error committed by any consultant of EZY Debt Solutions then we will honour refunding your Set Up Fee.