Debt Agreements:


A debt agreement is a special and formal arrangement and a legally binding agreement which freezes provable unsecured debts - to include store cards, credit cards, interest free loans, medical accounts, utility bills and some personal loans - upon acceptance of your proposal by creditors.

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It is a settlement that will enable you to pay them off quickly and safely with one affordable regular payment, or it will allow you to pay back the debts over an extended period of time at an amount that you can afford. Your creditors might agree to settle and accept - say 50% - if it is apparent that you are unable to pay any more than that and have little property of value.



You can submit a debt agreement if you have unsecured debts, net assets and a net income less than the indexed threshold amounts and if you are insolvent - that is if you cannot pay all your debts as and when they fall due.

How do you arrange to enter a Debt Agreement?


  • Contact your major creditors and find out whether they would be willing to consider a Debt Agreement proposal and if so, the minimum amount they would accept. If the majority of your creditors indicate their willingness to consider your proposal, then prepare a written proposal for a Debt Agreement to settle your financial affairs.

To help you administer your Debt Agreement, you could see a financial counselor, a Debt Agreement administrator or find a private trustee, or even a `knowledgeable' friend. You can also request the Insolvency and Trustee Service Australia (ITSA) to assist you in formulating the proposal.

  • Submit your written Debt Agreement proposal plus a Statement of Affairs to ITSA which decides if the proposal satisfies the requirements for entering a Debt Agreement.
  • ITSA accepts or rejects the proposal for processing to include submitting the proposal to your creditors for their acceptance or rejection. If ITSA does not accept the proposal they should provide the problem areas. You may be able to amend your proposal and resubmit.
  • The `acceptance' process of ITSA mainly involves inviting each of your creditors to decide whether it accepts - over 75% of the creditors have to accept the proposal for it to be accepted - or rejects the proposal. Your creditors must reply within 25 business days from the date your proposal was accepted by ITSA. While the proposal is being considered by your creditors, they are not permitted to take any further legal action including commencing court proceedings.
  • If your creditors accept the proposal, then both you and your creditors have entered a Debt Agreement.

Remember, giving a proposal to ITSA, or setting up a Debt Agreement and not keeping up the repayments is an 'act of bankruptcy'. A creditor can use this to apply to make you bankrupt.

Once a Debt Agreement is made between you and your creditors it is binding on all of you. The Debt Agreement is interest free and halts any legal action that may have been taken against you, meaning all court action including enforcement action - for example, the Sheriff repossessing your property or garnishees on your wages - must stop. The Debt Agreement ends when you have paid what you said you would pay in the proposal.

Your Debt Agreement is then recorded on the National Personal Insolvency Index (NPII). The NPII is a permanent record of all bankruptcies and Debt Agreements. The Debt Agreement may also be recorded on your credit report. The listing will remain on your credit report for 7 years from the date the Debt Agreement is made.

Remember that, although they usually accept Debt Agreements, creditors can refuse them if they choose.

If there is still no hope of getting out of debt with a Debt Agreement, you may have to file for bankruptcy. But again, before considering bankruptcy as the only alternative, research some of the other options that may be available to help you with your debts.