Debt Cutter can help you set up Formal Debt Agreement

What is a debt agreement?

A debt agreement is a binding agreement between you and your creditors and is regulated by the Australian government.  It is called a Part IX Debt Agreement, or Part 9 Debt Agreement, because it is Part IX of the Bankruptcy Act which lists the rules that apply.  Under this agreement, your creditors agree to accept an amount of money that you can afford to pay, over a set period of time, as settlement of your debts.  It may be a percentage of what you currently owe, and no interest or penalties apply if you continue to make payments.  Debt Agreements can be for up to five years.  Once you have made all the payments under the Debt Agreement, you do not owe any more money to those creditors.  Your debts are cleared.

A debt agreement is not bankruptcy, a consolidation loan or an informal arrangement with your creditors. A Part IX Debt Agreement allows you to protect your assets, you are able to retain your home, your car or other secured goods, as opposed to Bankruptcy where you are required to relinquish your assets.

There are also other options available to you.  Get an obligation fee Debt Consultation with one of our expert consultants to make sure a debt agreement is the right option for you.


Things to consider before getting a debt agreement

Make sure you’ve considered all the options available to you before getting into a debt agreement.  Debt Cutter can help you in many different ways, including talking to your creditors, help with managing your money, making sure you understand all the options available to you, and introducing you to help at a community level.

How a debt agreement works

If you meet the eligibility criteria, Debt Cutter will help you prepare a debt agreement proposal, based on what you can afford to repay.  The proposal will be sent to each of your creditors and they can vote to accept or reject your proposal. If the majority of creditors accept your proposal then the debt agreement will start and all creditors will have to accept the terms of the agreement.  All your debts are then entered into the debt agreement, and then all your creditors, all fees and charges are paid proportionately.

If a formal Debt Agreement is the best solution for you, Debt Cutter will work with you to plan the amount that you can afford to pay under the Debt Agreement.


Debts that can’t be covered by a debt agreement

There are some debts that can’t be covered by a Part IX debt agreement or have special conditions if they are included.

Secured debts

A secured debt is a debt that is tied to an asset. An example is home loan is usually secured by a property, or a car loan which is secured by the car.  A secured loan means that the lender can take back the asset you bought when you borrowed the money, if you don’t pay the loan back, so they can sell it and get their money back.

If the asset is sold and the money is not enough to cover the debt, the money still owing could be part of a debt agreement.


Joint debts

If you have a debt in joint names and your partner is unable to repay their share of the debt, the creditor can ask you to repay the outstanding amount.

In this situation the creditor can receive money as part of the debt agreement but still has the right to recover the balance of the debt from any other borrowers.


Debts that continue after a debt agreement has finished

Some debts cannot be paid out by a debt agreement. You will still have to pay for these debts after a debt agreement has finished:

  • Debts incurred by fraud
  • Child support
  • Fines, penalties or other court-ordered payments
  • Student HECS or HELP, Student Financial Supplement Scheme debts


Overseas debts

If you have an overseas debt, the overseas creditor is allowed to be part of the debt agreement process. Whether you will be liable for any outstanding balance when the debt agreement has finished will depend on the laws in the country where you signed the contract.


The impact of a debt agreement

Below are some of the things that can be affected if you decide to enter into a debt agreement.  We discuss all your options and the implications of each option with you so you can make a clear decision.

  • Your public record – Your name and other details will be listed on the National Personal Insolvency Index (NPII) for 5 years from the date of the agreement or 2 years after the end date, whichever is later. Where your proposal is withdrawn, not accepted, or lapses, the information will only appear for a year. The NPII is a public record managed by the Australian Financial Security Authority (AFSA).
  • Your future credit – Your debt agreement will be listed on your credit report for up to 5 years or longer in some circumstances.
  • Telling new creditors – You must tell a new creditor about the debt agreement when you take on new debt or obtain goods and services over a certain amount.
  • Your business – If you have a business and are trading under another name, your debt agreement must be disclosed to anyone who deals with your business.
  • Your career – It may prevent you from practising certain professions or being employed in certain positions of trust. If you belong to a regulated profession you should check the impact of your insolvency with the relevant professional body.
  • Possible bankruptcy – Proposing a debt agreement, whether it is accepted or rejected by your creditors, is an act of bankruptcy. If you propose a debt agreement that is not accepted by your creditors, they can use the act of bankruptcy to apply to the court to make you bankrupt.

To find out out more about what solutions are available to you, click on the options below:

Expert Debt Consultation (Free)

By talking to our experienced and understanding debt consultants you will get a clearer picture of what solutions are available to you after just one call.

Debt Management Plan

Debt Cutter can design a tailor made debt management plan just for you.

Credit Score Improvement

Debt Cutter has various strategies to help you improve your credit score.

Financial Counsellor

Financial counsellors are an independent free service supported by State Government, Federal Government and some cases charity groups to assist people in financial difficulty.


When there is absolutely no way you are able to pay back your debts, it may be time to consider bankruptcy.

Informal Debt Agreements

An Informal Arrangement is an agreement that allows you to manage your debt through a simple repayment plan, allowing you to get on with life without the hassle of debt collectors hounding at your door.

Debt Refinancing

When your debts are piling up and you are struggling to make repayments, debt refinancing may be the best solution for you.