Debt Life Line

Advantages of a Part IX Debt Agreement

• Unsecured creditors are proscribed from taking any further step in the collection of a debt, and rely on the Administrator to collect monies, make disbursements to them and keep them fully informed as to the progress of the ‘account’.
• Unsecured creditors are required to cease further accruing interest and the Administrator deals with each debt on the basis of the balance owing, as claimed by the creditor by statutory Voting Form.
  • All unsecured debts are frozen at the commencement of the statutory process;
  • Wage garnishee must be withdrawn;
  • Civil Court actions relevant to civil debts go into limbo and executions are stifled;
  • All unsecured creditors are dealt with equally, not favouring any particular creditor;
• Over 50% in value (Ordinary Resolution) of those who vote on a proposal, is sufficient to create a binding agreement or to reject the proposal; a further proposal can be presented to creditors if warranted by change in circumstance.
• The obligations imposed by the Debt Agreement are generally expunged by instalment payment over time but there is no obstacle to settling a debt agreement earlier if your financial circumstances change for the better;
• If your circumstances change for the worse during the term of an agreement , an application to vary the agreement may be proposed to creditors to accommodate those circumstances.
• The purpose of a Part IX Debt Agreement is to settle indebtedness by compromise, avoid the consequences of bankruptcy and permit the debtor to keep all assets where they can afford to be kept.
• Each person in a household can lodge an individual debt agreement. If there is substantial Joint Debt, partners may elect a ‘Conditional Proposal’ which indicates to creditors that if one proposal fails then the other will automatically be withdrawn. Vice Versa, if creditors accepts one then they are required to accept the other.
• Provided you meet the obligations imposed by the Debt Agreement you are free to go about your business and get on with your life without interruption or harassment from creditors.
• Completion of the obligations will be noted on both your credit reference file and the National Personal Insolvency Index.

Disadvantages of a Part IX Debt Agreement

• Secured debt cannot be included. Accordingly if payments are not maintained repossession of the security is permitted. Note: Any deficiency between the value of the security and the account balance is included. Payments toward secured debt is allowed for in the Budget of the debtor to ensure compliance with payment arrangements.
• Non-dischargable debt cannot be included and where its exists must be included in the Budget of the debtor (Maintenance or Child Support; fines and penalties due to the crown, HECS).
• Proposing a Part IX Debt Agreement is subject to the Bankruptcy Act 1966 (as amended). Therefore, a debtor seeking relief under this Part of the statute must realise:
  • Proposing a Part IX Debt Agreement is an ‘act of bankruptcy’.
  • It’s an ‘act of bankruptcy’ because you are formally declaring that you are insolvent and unable to meet your financial obligations as they fall due;
  • It is not ‘bankruptcy’, your assets and financial matters will not fall under the jurisdiction of a Bankruptcy Trustee;
  • Upon receipt of a proposal for processing by the Official Receiver and its acceptance for processing your personal details will be annotated on the National Personal Insolvency Index. Those details will remain forever, but will be annotated as ‘completed’ when completion occurs.
  • Your credit reference file will be annotated that you have committed an ‘act of bankruptcy’ and it will remain on your file for a period of seven (7) years. The file will be annotated ‘settled’ when all the obligations has been fulfilled;
• You will find it difficult to obtain credit during the term of the debt agreement and perhaps later until the annotation to the credit file is either annotated as ‘settled’ or the term of its publication expires; Note: SRMC Limited have assisted many clients obtain credit by issuing a letter to the lender stating that the agreement is up to date.
• If you fail to meet the obligations a creditor may terminate the agreement and as a consequence the debt will start accruing interest again.