A Part 9 Debt Agreement, also known as a Debt Agreement under Part 9 of the Bankruptcy Act 1966, is a legally binding agreement between a debtor and their creditors which outlines a repayment plan for outstanding debts. The agreement is administered by a registered Debt Agreement Administrator (DAA) who manages the debtor’s finances and distributes payments to creditors.
A Part 9 Debt Agreement is a formal alternative to bankruptcy as it allows the debtor to make affordable repayments over a period of time rather than facing the consequences of bankruptcy. The agreement can be reached between a debtor and their creditors if the debtor has unsecured debts of less than $118,200 and their income, assets and liabilities meet certain criteria.
To be eligible for a Part 9 Debt Agreement, the debtor must be insolvent, meaning they are unable to pay their debts as they fall due. The debtor will need to provide information about their income, expenses, assets, and liabilities to the DAA who will assess their eligibility and determine the appropriate repayment plan.
Once the agreement is reached, the debtor must adhere to the terms of the agreement, including making regular payments to the DAA who then distributes the funds to creditors. The Part 9 Debt Agreement typically lasts for three to five years, during which time the debtor is prohibited from obtaining credit without notifying the lender about the agreement.
One of the main benefits of a Part 9 Debt Agreement is that it allows the debtor to repay their debts in a manageable way while avoiding bankruptcy. It also provides protection from further legal action by creditors who are bound by the agreement once they have accepted it.
However, there are also some potential drawbacks to consider. The agreement will affect the debtor’s credit rating, making it harder to access credit in the future. Additionally, if the debtor is unable to meet the terms of the agreement, they may face further legal action from their creditors.
In summary, a Part 9 Debt Agreement is a formal arrangement between a debtor and their creditors to repay outstanding debts over a period of time. It is a viable alternative to bankruptcy for those who meet certain eligibility criteria and can help relieve the burden of debt while providing protection from legal action.
