Debt Agreements, Personal Insolvency
Agreements, or Part X Agreements
A debt management company can structure Debt
Agreement for you. These
agreements are governed by Commonwealth Government legislation, and are specifically designed to
help people with limited assets who are struggling under a burden of unmanageable debt. The terms are limited to five years. They are sometimes referred to as Personal Insolvency Agreements,
or Part X Agreements.
An agreement can consolidate debts and lock
in agreement with creditors on the amounts to be repaid. Legislation allows you to make one affordable weekly or
fortnightly payment to cover all the new consolidated debt, and no further interest is charged on
your debts or on the debt consolidation. The payment is made to a
Trustee, who distributes payments to creditors. Once the debt agreement is paid out, or the term is
expired, all creditors included in the agreement are deemed to be fully satisfied.
A debt agreement can only consolidate
unsecured debts. To be eligible, you
Earn less than about $1800 after
tax per week
Have unsecured debts totalling
less than about $82,500
Have assets totalling less than
$82,500 in value
Not be an undischarged
Not have had a debt agreement in
place in the last 10 years.
The fact that you have entered into a debt
agreement will be recorded in your credit history and will likely remain there for 7
years. The major advantage of these agreements,
however, is that they prevent creditors from harassing you, protect you from any legal action, and
freeze interest costs.
In some circumstances, a professional debt
management company will advise you to consolidate debts into a single unsecured personal
loan. This allows you to pay off the debt within your
budget, and may reduce interest costs. This solution
will only be recommended for those of good financial standing. This solution is unsuitable for undisciplined spenders who might
use their loan to pay off credit cards, and then proceed to incur more debt.
If you have equity in your home sufficient
to cover your debts, refinancing may be an
option. A professional debt management company can
help you arrange refinancing or a home equity loan. In
some circumstances, they may be able to assist you to access this option even if you have a bad