Most Australians wrestle with financial headaches during their lifetime, and this is often regarded as a typical fluctuation in our finances. But what if you’re not able to work out these problems yourself, but at the same time, you don’t want to file for bankruptcy?


Debt consolidation loans are a standard option that relieves folks of financial anxiety by consolidating all their current debts into one easy to manage loan that’s payable every month. Alternatively, debt agreements are another possibility available to people in financial distress, and this will be the focus of today’s article.


What is a debt agreement?

A debt agreement is ultimately a legal contract between you and your financial institutions which constitutes Part IX of the Bankruptcy Act 1966. Under this agreement, your creditors allow you to pay back a sum of money that you can manage, over an agreed time period, to settle your debts.


It is vital to note, however, that entering a debt agreement is an ‘act of bankruptcy’ and has long-term financial repercussions which may have a bearing on your ability to obtain credit down the road. As a result, it’s strongly recommended that people seek independent financial guidance before making this decision to make sure this is the best solution for their financial situation and they clearly grasp the implications of such agreements.


Prior to entering a debt agreement

There are a number of things one should consider prior to entering into a debt agreement. Reaching out to your lenders about your financial position is always the first step you should take to try to settle your debts outside of a debt agreement. Have you spoken with your lenders and asked them for extra time to repay your debt? Have you already tried to negotiate a repayment plan or a smaller payment to repay your debt?


What types of debts are included in debt agreements?

Debt agreements are designed to assist low income earners who are unable to pay unsecured debts. Not all types of debt are covered in debt agreements, such as the following:

  •  Secured debt – for example home mortgages where the property can be sold to recover money
  •  Joint debt – if you have a joint debt with a partner, creditors can demand that your partner repays the full amount if you’re unable to
  •  Foreign debt
  •  Other debts – such as debts incurred by child support, student HECS debts, court fines, and fraud


Are you eligible to enter a debt agreement?

To check if you are eligible, just visit the Australian Financial Security Authority’s (AFSA) website (


If you elect that a debt agreement is the best choice for you, a debt agreement administrator will assist you with your debt agreement proposals, based upon what you can afford, and send this proposal to each of your creditors. If your lenders accept the terms of your agreement, then your debt agreement will begin, for example, paying 75% of your debts to financial institutions over a 3-year time period.


Disadvantages of debt agreements

As explained earlier, debt agreements are an ‘act of bankruptcy’ and consequently there are serious implications one must take into consideration.

  •  If your lenders reject your debt agreement proposal, they can make an application to the courts for involuntary bankruptcy
  •  Your name will appear on the National Personal Insolvency Index (NPII) for 5 years from the date of your agreement, or 2 years after the end date, whichever is later
  •  Your debt agreement will be mentioned on your credit report for up to five years, or longer in some circumstances
  •  You are legally obliged to inform a new lender of your debt agreement when receiving a loan over $5,703.
  •  If you own an enterprise trading under another name, you are legally obliged to reveal your debt agreement to anyone who deals with your company.
  •  If your job belongs to a regulated profession or a position of trust, it may have a bearing on your employment.


Choose your debt agreement administrator carefully.

Debt agreement administrators play an integral role in the success of your debt agreement, so always opt for an administrator that is registered with AFSA’s list of registered debt agreement administrators. Costs also fluctuate widely between administrators, so always look into the payment terms prior to making any decisions.


If you’re still unsure if a debt agreement is the right choice for you, get in contact with Bankruptcy Experts Gympie on 1300 795 575 who can give you the right advice, the first time. To read more, visit