What is a Part 9 Debt Agreement and Discharge in Australia?

A Part 9 Debt Agreement is the most common type of agreement which is legally binding as an arrangement between yourself and creditors.

This formal arrangement outlines what you agree to repay to your creditors over a set timeframe. This could be 3 or even 5 years, depending on the individual.

Creditors are generally happy with these arrangements when they see what you can reasonably afford to pay. The Bankruptcy Act 1966 permits this agreement and officially it’s known as a Part 9 Debt Agreement in Australia.

How to become eligible for Part 9 Debt Agreements

In order for you to qualify, you must meet some certain criteria. These include:

  1. You’ll need to be insolvent. This means that you just can’t pay back your debts right now.
  2. You haven’t entered into a bankruptcy agreement in the past, the same or any other type of debt agreement
  3. You haven’t been given authority to use a Part 10 Debt Agreement at any time over the last 10 years
  4. Remain under defined restrictions that the Australian Financial Services Administration specifies for unsecured debts, post-tax income and assets for the following year.

The best types of debts

The Part 9 Debt Agreement doesn’t work for all types of debts.

Part 9 Debt Agreements

Here’s what they can include:

  1. Expensive medical bills
  2. Overdue credit cards
  3. Store cards (David Jones etc)
  4. Personal loans

These are all unsecured debts. Secured debts like car loans and mortgages must be paid to the bank like normal. That is – you can’t use a Part 9 debt agreement to escape from these.

If you have toll fees, speeding fines and parking tickets, then these will also need to be repaid like usual. These debt agreements aren’t really viable for small debts of a few hundred dollars.

Are they worth it?

It really depends on your situation. For some people, they are a terrible idea because the individual would already be well equipped to tackle the debts on their own. In other words, they don’t need these complexities at all.

Often you can ask for a payment plan or extension from a creditor directly. You can declare financial hardship especially if you have a sick family member or lost your job recently.

For others, however, they can be the absolute saving grace. The chance for them to start fresh and on the road towards a 100% debt-free lifestyle. That’s what we preach here often. 🙂

How will you know for sure? You need to talk to a professional. You can get in touch with us or speak with someone who knows your situation very well and can advise on your individual circumstances.

One thing is that you won’t have the ability to take out any loans under the Part 9 debt agreement. The dog got sick and you need to pay the vet bill? Need a car for work? Well, you’ll have to work out how to do that yourself without taking out a loan.

Next steps

We like Part 9 debt agreements but only when all other options have been exhausted. Have you considered debt consolidation? Most people benefit more from this than any type of bankruptcy documentation, especially as you can still take out a loan for emergency reasons in the future.

Another option is to get additional work or borrow a small amount from friends. This can help you get by for a little while.

Remember that debt collectors are real people and while this is a serious situation, you need to remember that they have a heart. Communicate with them and explain your situation or get us to talk to them on your behalf.

Because we know how harassing the debt collectors can be. Let us help you through these challenging times. ?

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