Paul is a single man employed as an Interior Decorator who was struggling with his personal loan and credit card for more than 12 months. Paul was earning just under $50,000 per annum. Paul’s troubles began when he lost his job due to a drink driving charge. He was then forced to give up his current employment and found local employment.

Whilst Paul was unemployed his debts kept mounting up as he could not pay them as they fall due. Some creditors lodged defaults on his credit record and one creditor threatened legal action.

Paul was struggling to keep up with all his payments, including his secured car loan repayments. He called Debt Free when Esanda had repossessed his car. Paul’s accounts fell into arrears as he did not even have the money to keep up even the minimum monthly payments. His debts totaled $39,683.00 and his minimum monthly payments were $1,737.72 per month or $404.12 per week.

Get Debt Free did a free debt assessment for Paul and prepared a budget which Paul felt he could afford.  After that Debt Free then prepared a Debt Agreement Proposal which included a weekly contribution into his Debt Agreement of $150 per week.  

This represented a saving on the minimum monthly payments of preparation of $254 per week. Paul agreed to pay this weekly amount for 260 weeks (5 years).  The creditors accepted his Debt Agreement proposal and Paul was delighted.  Paul’s creditors will receive a dividend of approximately 70  cents in the dollar over 5 years.  

This Debt Agreement proposal provided creditors with a better return than what they would have received if Paul had been forced into bankruptcy.  Once Paul has paid his 260 payments of $150, his debts will be fully satisfied and the 30 cents in the dollar will be fully written off.

If you would like to find out how a Debt Agreement proposal could be tailored for you please contact us today on our toll free line on 1800 9810 70 or apply online for free debt assessment.

This is where a personal debt advisor can help. At Debt Free we have years of experience helping people deal with their personal debt problems and have a team of highly trained personal debt advisors ready to help. Our personal debt advisors are here to help you work out a plan to deal with your debt.

One of the primary reasons people should talk to someone with experience when dealing with their debts is that they may not be aware of all the options available to them. Many people we speak to think that their options are restricted to bankruptcy, but this simply isn’t true – there are several other options to consider.

A good personal debt advisor will be able to walk you through our debt solutions and explain the advantages and disadvantages of each. The debt solutions which are available to people with debt problems could include a debt agreement a personal insolvency agreement or debt consolidation (usually only for people with a good credit rating). You can learn a lot about these options online, in fact we have a lot of information right here on our website, but to really understand which debt solution is best for you it is best to call us or apply on-line

At Debt Free our personal debt advisors are experienced and professional and will always find the best debt solution to suit your circumstances. Remember our advice is free and you can also call our toll free line on 1800 98 10 70

Debt Free has been officially registered with ITSA since the 1st of July 2007 when the formal registration process was initially introduced. Given Debt Free was registered from the beginning, you can be assured if you choose us you will be dealing with a reputable and experienced Registered Debt Agreement Administrator. In fact our company is a little different to most other debt agreement companies. Our Managing Director is a Chartered Accountant and a Registered Trustee in Bankruptcy. This means you would be dealing with a company which is owned and operated by a managing director who is fully qualified in the personal insolvency profession.  Many other RDAAs are not Registered Trustees in Bankruptcy which means they do not hold the full personal insolvency licence with ITSA. Worse still dealing with an unregistered administrator could cost you more money in the run long as they typically charge money up front and then they simply refer your case to a RDAA at some later stage.  That means any money paid to the unregistered administrator would be wasted and the time your case was with them would also be wasted.

To make sure you are dealing with the appropriate person or company to assist you to set up a debt agreement make sure you ask the following questions:

•           are you a Registered Debt Agreement Administrator licensed by ITSA?

•           are you regularly inspected by the ITSA?

•           What qualification do you have?

After you ask these questions, you will only then be able to establish if you are dealing with a properly registered company.

To see if a person or company is registered with ITSA click here

Advantages

• All current or pending legal action against you will be frozen as soon as your proposal is accepted for processing by ITSA. Even future legal action from your existing creditors will be frozen as soon as your proposal has been accepted by ITSA for processing. This freeze will remain in place as long as your proposal is accepted by your creditors.
• Secured creditors are unaffected by the agreement so you can keep any leased assets (ie your car) and also keep your house as long as full disclosure is made.
• A debt agreement follows the concept of debt consolidation, ie  a debt agreement (once approved by your creditors) bundles all the existing debt and becomes payable over the course of the debt agreement by the agreed installments.  The agreed installments are paid to the appointed debt agreement administrator. The benefits of this are similar to the benefits of debt consolidation
• Many of the restrictions placed on you by bankruptcy, such as restrictions on travel and the ability to retain or acquire property, do not apply to debt agreements.

Disadvantages

• Some of your personal details, including your name, will be recorded on the National Personal Insolvency index, known as the NPII. These records are recorded indefinitely. These details are available to anyone who can access the NPII after paying a fee.
• Your credit rating will be affected, with your name and some details being recorded on consumer credit databases. This means that you may have some difficulty in obtaining a loan, however, we find that once you have successfully completed your debt agreement you should be able to obtain a loan (subject to lending criteria).

If you are struggling with unsecured debt, we believe that the advantages of a debt agreement outweigh the disadvantages. Consult with our expert debt consultants today.

At Get Debt Free, we are often asked many similar questions about debt agreements and how they can help people get out of debt. We wanted to provide a little more information to our visitors of this site to help them get a basic understanding of how debt agreements work in Australia. For more info on this subject, view our debt agreements page.

Please keep in mind that applying for a debt agreement is a complicated process based on individual circumstances so we can only provide general information here. The best option is to discuss a debt agreement with our debt consultants who are personal debt specialists. We offer free advice that is tailored to individual circumstances. You can call us on 1800 98 10 70. In the meantime, please read on to learn a little more about debt agreements.

What is a Debt Agreement?

A Debt Agreement is a legally binding, flexible agreement made between your creditors as an alternative option to bankruptcy.

A debtor will negotiate with their creditors, usually through a Registered Debt Agreement Administrator (RDAA), to settle their debts. Usually this is for less than what the debtor owes the creditors.  Once approved by creditors the agreement becomes legally binding under Australian Law on all parties.

Who can enter a Debt Agreement

There are some limitations as to who can enter into a debt agreement. These are:

• If you have been bankrupt or have entered into a previous debt agreement during the past ten years then you cannot enter into a debt agreement.
• Your income must be less than the current income level as published by ITSA and adjusted by CPI
• Your  outstanding or unsecured debts must be less than the current debt threshold as published by ITSA and adjusted by CPI
• Your property must be less than the current property threshold as published by ITSA and adjusted by CPI
• You must be personally insolvent

If you are unsure how these conditions are applied please call today so we can assess your individual circumstances. Remember each debt agreement proposal is different and are all tailored to your financial circumstances. Call today on 1800 98 10 70 to see if we can help you discover your options. If your circumstances are different please call us as you may qualify for another product or service.

How does it Work?

If you feel you are eligible for a debt agreement it is best that you consult with a Registered Debt Agreement Administrator who are qualified to submit your proposal to ITSA for processing.  Personal Insolvency can be complicated and for that reason we recommend that you only deal with a qualified personal insolvency expert.  At Debt Free our debt consultants are trained and supervised by a Registered Trustee in Bankruptcy who is also a fully qualified Chartered Accountant.  Our debt consultants are highly experienced to handle all personal insolvency cases. Debt Free have been supervising debt agreements since 2006 and have helped hundred of Australians.

Once we have formulated your debt agreement proposal we will submit it for processing with ITSA.  After that Creditors will have approximately 35 days to votes on the proposal.  If it is accepted it will become a legally bound agreement.

We can help you work out a proposal that is both acceptable to you and your creditors.  We will make the entire process as simple as possible.

What if I break the Agreement?

The agreement is legally binding. If you do not honour the terms you agreed then creditors may terminate it, which may lead to bankruptcy.

Can I change a Debt Agreement?

If your circumstances change, you do have the option of putting forward variation to your debt agreement. These changes must go through the same voting process that the original debt agreement did. If accepted, these changes will then become legally binding to your creditors.

How is a Debt Agreement different to bankruptcy?

A debt agreement is an alternative debt solution to bankruptcy. For a debtor, it may be a preferable solution as it involves less restrictions being put in place, ie overseas travel and property ownership.

After declaring bankruptcy, a debtor will have restrictions placed on travel and ownership of property. A  debt agreement does not imposed these restrictions.

ADMINISTRATIONS UNDER THE BANKRUPTCY ACT 1966

STATISTICS (PROVISIONAL*)

JUNE QUARTER 2011

BANKRUPTCIES  (Parts IV and XI)

The Insolvency Trustee Service Australia (ITSA) is the federal government agency who administers and regulates the personal insolvency regime in Australia.  ITSA has an office in every capital city of Australia.

The Australian Bankruptcy Act creates separate roles for delegates appointed by the Minister and office of the Official Trustee in Bankruptcy.

What does the Inspector General in Bankruptcy do?

The inspector General in Bankruptcy is appointed by the Minister and is charged with the role of licensing and regulating the activities of Registered Trustees in Bankruptcy and Registered Debt Agreement Administrators. Section 12 of the Bankruptcy Act sets out the powers and responsibilities of the Inspector General in Bankruptcy which are namely:

• to make any enquiries or investigations into the conduct of a Registered Trustee in bankruptcy;
• to review certain decisions of a Registered Trustee in Bankruptcy;
• to make any enquiries or investigation into the conduct of a Registered Debt Agreement Administrator;
• to make enquiries and investigations into the affairs of a bankrupt, a debtor subject to a Personal Insolvency Agreement or a Debt Agreement;
• to provide the minister after each financial year a report on the operations of ITSA and activities under the Bankruptcy Act
• to fulfill the Inspector General in Bankruptcy functions under the Bankruptcy Act, the Inspector General may:
• call for the production of any books or records maintained by a Registered Trustee in Bankruptcy or Registered Debt Agreement Administrator
• call for a written answer from a Registered Trustee in Bankruptcy or Registered Debt Agreement Administrator

What does the Official Receiver do?

The Official Receiver is also appointed by the Minister to discharge functions under the Bankruptcy Act and has powers, such as:

• issue Bankruptcy Notices (Section 41 of the bankruptcy Act);
• order access to premises to remove or take copies of records of a bankrupt (Section 77AA of the Bankruptcy Act);
• issue notices to persons to provide information pertaining to the affairs of a bankrupt (Section 77C of the Bankruptcy Act);
• issue notices to persons to make payments to the Trustee in Bankruptcy to discharge a bankrupt’s obligation under the compulsory income contribution regime (Section 139 ZL of the Bankruptcy Act);
• issue notices to persons to make payments  who have received money or property from a bankrupt that is void against the Registered Trustee in Bankruptcy (Section 139 ZQ of the Bankruptcy Act)

What does the Official Trustee in bankruptcy do?

The Official Trustee in Bankruptcy administers bankrupt estates where a Registered Trustee in Bankruptcy has not consented to act. The Official Trustee in Bankruptcy is a government body (ie it is not a natural person) and its functions are discharged by employees of ITSA under the supervision of the Inspector General in Bankruptcy.

Any property belonging to the bankrupt at the date of bankruptcy automatically vests in the Trustee in Bankruptcy (Section 58 of the Bankruptcy Act).

Trustee to take possession of property

A Trustee in Bankruptcy must take control of the bankrupt’s property including any books and records of the bankrupt (Section 129 of the Bankruptcy Act).On application by the Trustee in Bankruptcy the court may enforce the Trustee’s rights to take possession of property.

Any person holding books and records of a bankrupt is not entitled to withhold possession of the books and records from the Trustee in Bankruptcy.

A Trustee in Bankruptcy is not to take possession of protected property (Section 116 of the Bankruptcy Act), which includes:

• motor vehicles worth less than the prescribed value (currently $6,850); or
• tools of trade worth less than the prescribed value (currently $3,400); or
• personal property of the bankrupt of sentimental value; or
• other property identified to be protected by a special resolution of creditors.

Admit provable debts to distribute in accordance with priorities

Provable debts
All debts and liabilities owing by a bankrupt at the date of bankruptcy (excluding non-provable debts) are provable in the bankrupt estate (Section 82 of the Bankruptcy Act). The exception to this rule is non-provable debts.  Non-provable debts are debts are defined as debts such as:

• monies payable under a maintenance agreement;
• monies claimed as un-liquidated damages (ie an amount demanded as a result of a car accident);
• monies owing as a result of a court imposed fine;
• monies owed under the HECS scheme;
• monies owed under a proceeds of crime order;
• monies owed for interest after the date of bankruptcy

A provable debt needs to be submitted to the Trustee in Bankruptcy in the prescribed form (being a Proof of Debt in accordance with Section 84 of the Bankruptcy Act).

Distribution of funds
A Trustee in Bankruptcy must distribute any surplus funds to creditors strictly in accordance with Sections 109 and 140 of the Bankruptcy Act.  Prior to any distribution of funds to creditors a Trustee in Bankruptcy is entitled to be remunerated in accordance with Sections 161B or 162 of the Bankruptcy Act.

What duties does a Trustee in Bankruptcy have?

A Trustee in Bankruptcy has fiduciary obligations to creditors and the bankrupt, however Section 19 of the Bankruptcy Act sets out statutory duties of a Trustee in Bankruptcy.  These duties can be summarized as follows:

• notify the creditors of the bankruptcy
• determine whether the estate has any property that be can realized to pay a dividend to creditors
• report to creditors on the likelihood of creditors receiving a dividend
• provide information about the estate as creditors reasonably request it
• determine whether the bankrupt has made any transfer which is void as against the trustee in bankruptcy
• take appropriate steps to recover property for the benefit of creditors
• take appropriate action to try and ensure that the bankrupt discharges their obligations under the Bankruptcy Act
• consider if the bankrupt has committed an offence under the Bankruptcy Act
• refer to the Inspector General in Bankruptcy any evidence of an offence the bankrupt has committed under the Bankruptcy Act
• administer the estate as efficiently as possible by avoiding any unnecessary delay
• exercise powers and perform functions in a commercially sound way

Section 173 of the Bankruptcy Act states that a Trustee in Bankruptcy must maintain proper books and records to exhibit a full and correct account of the administration of the estate and the Trustee shall allow any creditor to inspect the records at any reasonable time.

Section 177 of the Bankruptcy Act states that a Trustee should also have regard for any lawful direction as resolved by creditors at a meeting of creditors.

• by your voluntary application (debtor’s petition)
• by application of your creditors (creditor’s petition)

Voluntary appointment (debtor’s petition)

You can voluntarily lodge a debtor’s petition with the Official Receiver of ITSA if you are insolvent (Section 55 of the Bankruptcy Act).

The Official Receiver may reject a debtor’s petition on the following grounds:

• if the debtor is not ordinarily resident in Australia (Section 55 2A of the Bankruptcy Act)
• if the statement of affairs or debtors’ petition is not complete (Section 55(3) of the Bankruptcy Act)
• if the Official Receiver believes (based on the information contained with the statement of affairs) that the debtor has the capacity to pay all debts immediately or within a reasonable period of time (Section 55 3AA of the Bankruptcy Act)

In-Voluntary appointment (creditor’s petition)

A creditor can apply to court for a sequestration order (Section 43 of the Bankruptcy Act) by filing a creditor’s petition with the Federal Court of Australia.  A creditor may only file a creditors petition, if

• the petitioning creditor is owed at least $5,000; and
• the debtor has committed an act of bankruptcy; and
• the petitioning creditor has issued a bankruptcy notice which the debtor has not complied with.

A creditor applying to court for a sequestration order may appoint a trustee of their choosing.

How long will I be bankrupt?

A bankrupt will ordinarily be automatically discharged from bankruptcy after 3 years of filing a statement of affairs (Section 149 of the Bankruptcy Act) unless the Trustee in Bankruptcy files an objection to discharge in accordance with Section 149B of the Bankruptcy Act.

A Trustee in Bankruptcy may file an objection to automatic discharge and if accepted, a bankruptcy can be extended up to 5 years in total or in extreme cases up to 8 years in total.

Who do I appoint as my Trustee in Bankruptcy?

If you file a debtor’s petition (ie you voluntarily file for bankruptcy) you can elect to appoint a Registered Trustee or the Official Trustee.

Registered Trustee

A Registered Trustee in Bankruptcy is a suitably qualified accountant in private practice. Learn more about a registered Trustee.

Official Trustee

The Official Trustee is the ITSA government agency who administers bankrupt estates in public practice.  Learn more about the Official Trustee.