Debt Agreement

The Federal Court and Federal Magistrates Court administer bankruptcies under the Bankruptcy Act 1969 which also provides for 2 other alternatives to bankruptcy, specifically Part IX Debt Agreement and Part X Personal Insolvency Agreement.

Part IX Debt Agreement

A Debt Agreement is negotiated arrangements with your creditors which set out how exactly how you will repay your outstanding debts and what proportion will be paid to each creditor. Your outstanding creditors will vote on the proposed agreement.

The debt agreement will become binding on both you and all creditors if 75% of the value of the debts vote in favour of the Debt Agreement. If a creditor votes against the agreement they will still be bound by it if the 75% vote in favour.

No Trustee is appointed for a Debt Agreement and there is a minimum formality to the negotiations which helps to keep the costs down.

Part X Personal Insolvency Agreements

Personal Insolvency Agreements are binding arrangements under Part X of the Bankruptcy Act. Such arrangements also require a vote by creditors, however, the vote is taken at a formal creditor meeting.

When creditors accept the proposal the agreement becomes binding on you and the creditors. A trustee is still appointed under a Personal Insolvency Agreement and the process is more formal than under a Part IX Debt Agreement.

The cost of a Personal Insolvency Agreement is also higher than a Part IX Debt Agreement and which can place further financial strain on your finances to fund the solution to your debt problems.

Credit Report

Both Debt Agreement and Personal Insolvency Agreement will still result in your details being registered on the National Personal Insolvency Index (NPII).

ITSA maintains the NPII register and the record is permanent and available for anyone for a fee. Credit reporting agencies will record whether you have been a bankrupt, or entered into either a debt agreement or personal insolvency agreement and keep that record for 7 years.

Because these options will become part of your credit record for many years to come the should be seen as one of your final alternatives along with bankruptcy.

When you conduct an informal and private debt settlement negotiation with your creditors the information is not made public and placed on your credit records.

Bankruptcy laws are complex and we strongly recommended that you seek legal advice before filing for bankruptcy along with advice from a professional financial advisor.