Debt Agreement

This increasingly popular program is designed to assist low income residents who are insolvent and thus unable to repay their unsecured loans. It is necessary to meet both income and outstanding loans guidelines to qualify. The applicant must also have not used this debt management program or been in bankruptcy within the previous 10 years.

By negotiating a reasonable compromise with creditors, the debtor who qualifies for this plan will be committing to repaying at the most 75% of the outstanding loans and bills. However, all late charges and additional fees will be immediately frozen. Also, the weekly one payment will be assigned based on income and other financial responsibility which means it will be much more manageable for the debtor.

The first step involves having a trained financial counsellor, a debt agreement administrator, or a private trustee file the necessary paperwork with ITSA (Insolvency and Trustee Service Australia). The debtor will need to disclose all assets and loans at this time. The trustee will become the negotiator who works with creditors. A simple majority of creditors must agree to the terms of the new financial arrangement. They will then work directly with the trustee and no longer be allowed to harass the debtor.

This debt agreement program, which is similar to the personal insolvency program, is becoming more and more popular in Australia because it involves lower approval levels and overall less operating costs for the person who is already struggling with unmanageable loans. Making one weekly payment to the trustee becomes much simpler than trying to make multiple, more costly repayments to individual creditors. For an opportunity to regain one’s financial freedom, this government-sanctioned debt recovery program is definitely a positive alternative to the much more severe consequences of bankruptcy.

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