If you have found yourself in a position of debt that you can’t get out of, there is no need to be alarmed. You aren’t the first person to rack up more debt than they can afford to pay off and there are options available to you that can help you out. Debt can happen for a number of reasons, whether an unexpected payment came up, such as an accident or house repairs, or you borrowed above your means and can’t find a way. The first step is acknowledging that you need help, and the next is to find a way out that leaves you in the best financial position possible. One of your options is entering into a debt agreement. In this article, we are going to look at what is a Part 9 debt agreement?
What Is A Part 9 Debt Agreement?
A debt agreement, also known as a Part 9 debt agreement, is a legally binding agreement between you and creditors. You usually find yourself in this position when you have been unable to make the repayments on a loan you have taken out. Usually, under this agreement, you establish new terms for the loan to be paid off under within 3 to 5 years. The payment that is agreed upon is based on what you can afford to pay back each month.
So now we understand: what is a Part 9 debt agreement? Let’s take a look at how exactly they work.
How Does It Work?
There are a few steps involved when it comes to putting in place a debt agreement:
- In order to be eligible for a debt agreement, you must: be insolvent, have not been bankrupt or have entered into a Part 9 debt agreement in the past 10 years, and be under set limits specified by AFSA for unsecured debts, assets and after-tax income for the next 12 months.
- Next, you need to speak with a registered debt agreement administrator who will help you draft a proposal. They then lodge it on your behalf.
- At this stage, it is handed over to AFSA (Australian Financial Security Authority) to review and manage the voting process with your creditors. If a majority of creditors vote yes to your proposal then it is accepted.
- Once your proposal becomes a debt agreement, then you must comply with the terms set out.
Is a Part 9 Debt Agreement Right For Me?
So, what is a Part 9 debt agreement and is it right for you. It’s important to note that a debt agreement isn’t something to be entered into lightly. In fact, you should explore all other options before even entertaining the notion of taking one out. For example, you may find that debt consolidation is all you need to get on top of your debts and start paying them off on time. If that’s the case, then you can go down the path of taking out a new loan to pay off your existing ones and see if things are easier with all your debts in the one place with just one payment to make each month.
A debt agreement is just one of the formal agreements available to your under the Bankruptcy Act. There are other options under there such as insolvency and debt protection for six months. It is important to explore all the options and consider which one is best under your circumstances.
Consequences Of Debt Agreements
Another thing to be aware of is the consequences that come with taking out a debt agreement. Firstly, it does not release you from your debts, so you will still need to find a way to pay them off. Here are some other ways it will affect you:
- The amount of your agreement will appear on the National Personal Insolvency Index for a time.
- Your ability to obtain future credit can also be affected as your credit score is lowered as a result.
- If you own a business, a debt agreement can affect it.
Seeking Professional Help
If you have found yourself in a position that you are considering taking out a Part 9 debt agreement, then it is time to go down the path of seeking professional help. The first step is to know all the options available to you and what makes the most sense for your individual circumstances. The expert team at Debt Consolidation offers a personal approach that takes into account your individual circumstances to offer the best advice.
In some cases, a debt consolidation plan may be all it takes to get you back on track and meeting your repayments. In other situations, you may need to go down the path of a Part 9 debt agreement to help to find a financial solution. The best thing you can do is look at all your options and find the best one for you.