Agreement

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 must: 

·         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 bankrupt 

·         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. 

Unsecured personal loans 

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. 

Refinancing 

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 credit history.