Prevent Bankruptcy with Debt Agreement

A debt agreement serves as an alternative to bankruptcy, thus saving a debtor’s assets. It is an agreement under Part IX of the Bankruptcy Act of 1966, which is legally binding between a debtor and his or her creditors. With the help of this, a person can overcome a temporary financial strain that may cause him to miss out or default on loan repayments and other fixed expenditure. Under the Part IX Debt Agreement, unsecured personal debts or loans such as bills, credit and store cards, overdrafts, personal loans etc. can be covered. It must be understood that secured loans like a home or a car loan are not covered under the debt agreement. In Australia, this is controlled and monitored by the Australian Financial Security Authority (AFSA). This agreement is made with the help of a Debt Agreement Administrator, wherein the amount that can be repaid to the creditors is calculated based on the income and expenditure of the person. The amount that is remaining after the expenditure is offered to the creditors in a formal Debt Agreement Proposal. Creditors have to agree to accept this sum of money to convert this proposal into an agreement. This offers a debt-free consolidation of the outstanding loans and any legal action against the debtor to recover the money becomes null and void. Once this agreement is made, creditors cannot add any more interest payments to the debt. Hence, the debtor needs to repay only the balance of the debt agreement. As per the strict rules enforced by the government with regard to the Part 9 Debt Agreement in Australia, all previous debts will effectively close legally when the debtor has completed all payments and obligations under this agreement.