tyle="margin-left:17.85pt">·         A debt agreement is a binding agreement between you and your creditors. Creditors are the people you owe money to. A debt agreement involves your creditors accepting an amount of money that you can afford taking into account your income, assets and expenses.

·         You will be released from your debts upon your fulfilment of all payments and obligations under the agreement.

·         The debt agreement may require:

o   the sale of assets;

o   periodic payments to creditors;

o   a lump sum payment to creditors; or

o   suspension of payments to creditors.

·         You are only able to lodge a debt agreement proposal if you:

o   are insolvent and unable to pay your debts when they fall due;

o   have unsecured debts, assets and an after-tax income less than set indexed limits; and

o   have not in the last 10 years:

§  been bankrupt;

§  had a debt agreement; or

§  appointed a controlling trustee.

·         Upon proposing a debt agreement:

o   your name will be noted on the National Personal Insolvency Index (NPII);

o   you may struggle to successfully apply for further credit;

o   details of the agreement will appear on credit reporting agencies’ databases for up to five years or sometimes longer; and

o   during the voting period your creditors:

§  are not able to commence or continue debt recovery action;

§  are not able to enforce action against you or your property; and

§  must suspend garnishee deductions.

·         Entering a debt agreement has serious consequences. In particular:

o   unsecured creditors become bound by the agreement and are paid on a pro rata basis;

o   you are released from the majority of your unsecured debts upon fulfilling your obligations including completing all payments;

o   secured creditors can possess and sell any secured assets (assets you have offered as security for credit) if you are in default of the relevant credit agreement;

o   unsecured creditors are unable to take any action against you or your property to collect their debts; and

o   the agreement does not release any others such as your spouse from any debts they owe jointly with you.