Bankruptcy
5. Debt Agreement Process
Firm / Chambers:
Last updated: 22 Jun 2015
- There are several stages to the debt agreement process.
- The first stage is obtaining information and lodging forms.
- You must read and sign documentation regarding the consequences of bankruptcy, debt agreements and other alternatives.
- You must also decide whether to appoint an administrator or to administer the agreement yourself.
- An administrator will charge a fee for their services but can provide assistance to you by:
- providing you information about your options and negotiating with your creditors;
- determining the extent of your debt;
- helping you to draft a debt agreement proposal that is appropriate to your financial situation; and
- assisting you with the filling out of forms to be lodged with the Australian Financial Security Authority (AFSA).
- Three forms are required:
- your debt agreement proposal;
- an explanatory statement setting out your financial position and the cause of your financial problems; and
- a statement of affairs detailing your personal information and circumstances.
- The second stage is lodging your proposal.
- Your proposal must be completed and lodged with AFSA within 14 days of you signing it.
- A certificate signed by the administrator must accompany all proposals. The certificate must state that the administrator:
- has given you all of the required information;
- believes you are able to make the proposed payments; and
- believes you have accurately described your affairs.
- If you are administering the proposal yourself you do not need to provide a certificate. You must provide AFSA with a signed copy of the prescribed information when you lodge your proposal.
- The relevant forms can be downloaded at http://www.afsa.gov.au.
- The third stage is sending the proposal to creditors for consideration and voting.
- Upon lodgement of the forms and payment of the lodgement fee your proposal is reviewed to ensure it satisfies the eligibility criteria.
- If your proposal is accepted for processing it is recorded on the National Personal Insolvency Index (NPII).
- Each creditor is sent:
- a report;
- copies of your proposal;
- copies of your explanatory statement;
- a statement of claim; and
- a voting form.
- Creditors vote on the proposal by returning the statement of claim and voting form by the specified deadline.
- For your proposal to be accepted a majority in value of creditors who vote must vote ‘yes’.
- If your proposal is accepted your proposal becomes a debt agreement.
- If creditors reject your proposal or if no creditors vote then creditors can commence or continue recovery action against you.
- If your proposal is withdrawn by you or is cancelled by AFSA then creditors can commence or continue with action to recover their debts.
- The NPII is updated when your proposal is accepted or rejected and if your proposal is withdrawn or cancelled.
- The final stage of the process requires carrying out the debt agreement.
- If creditors accept your proposal you must comply with its terms.
- If you experience difficulty making payments you should let your administrator know as soon as possible.
- Your administrator will:
- collect payments;
- keep you and your creditors informed;
- pay dividends to your creditors; and
- advise AFSA when the agreement is completed.
- If you think you may need legal advice you can use our free Find a Lawyer directory to contact a lawyer near you.
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