Suppose you have an unsecured debt totalling $35,000 and you can afford to offer $125 per week to your creditors for 260 weeks, or $32,500. If the creditors accept your proposals, they also appoint us with the management of your debt contract and accept that we can keep part of the repayment for the contract management work. The amount we withdraw will be deducted from the $32,500 and it is not an additional amount or extra you pay. Guaranteed debts cannot be included in a debt agreement. So if you have a guaranteed debt, such as a car loan or a home loan, then that debt must be settled outside the debt contract. If you have sold the assets that are subject to the guaranteed liability guarantee, any deficit can be included in the debt agreement. Ted and Josie are married and have four children. Ted works as a salesman and earns $25,000 a year. Josie worked as an administrative employee, but this work ended a few months ago. Since then, it has been impossible for Ted and Josie to keep pace with their credit repayments. Ted and Josie feel that they will continue to slide backwards and that they will never catch up. Ted and Josie are considering bankruptcy.
Then you`ll see an ad saying, “If you`re struggling to pay your debts, there`s a possibility you can release without going bankrupt! Call me now. Rushika had to face repayments on 3 credit cards and a personal loan. She works, but she is a very young employee and never seems to be able to pay much more than interest on her credit cards. She came across an internet ad for a service called Beat Debt Solutions, which promised to stop the interest on their debts and wrap all her debt repayments in a simple payment. Debt agreements are strongly encouraged by private companies entering into and/or managing debt contracts for a fee, and the number of debt contracts has increased significantly in recent years. Debt agreements are often marketed as a kind of interest-free “credit consolidation,” which is misleading. It is important to understand the risks and consequences of entering into a debt contract and to understand what your other alternatives might be. No, although debt contracts are managed in accordance with bankruptcy law, they are an alternative to bankruptcy. However, by submitting a proposal, you are committing “an act of bankruptcy.” Debt contracts are regulated by the Australian Financial Security Authority, known as AFSA. For more information on debt contracts, bankruptcy contracts and private insolvency contracts, visit the AFSA website at www.afsa.gov.au. AFSA sends the proposal and explanatory statement to your creditors and asks them to explain their debts in detail and vote on the proposal. A debt contract (also known as Part IX Debt Agreement) is a formal way to settle most debts without going bankrupt.
Sometimes the person who promotes the debt contract is not a debtor, but another person who acts as a broker. This person usually receives a fee from you or some of what you pay to the administrator of the debtor agreement. Be especially careful with these people as they are not regulated by AFSA. Debt contracts are a formal alternative to bankruptcy under the Bankruptcy Act for insolvent individuals (unable to pay their debts when they mature). As part of a debt agreement, your unsecured creditors agree to accept less than the total amount of debts due in return for a commitment you made to make regular repayments for an agreed period. As of June 27, 2019, debt contracts are limited to a maximum of 3 years or 5 years during which you own or pay your home. A debtor who proposes a debt contract commits a bankruptcy. It is not the same as a bankruptcy. A debt contract is an alternative to bankruptcy, but as it falls under Part IX of the Bankruptcy Act, the proposal of a debt contract is considered a bankruptcy deed.