Get Out of Debt Without Filing for Bankruptcy with a

Formal Debt Agreement

If you’re struggling with an overwhelming amount of debt, multiple creditors, and endless collection calls, Bankruptcy isn’t the only option!

Formal Debt Agreements are a Bankruptcy alternative that allow you to settle your debts by paying an affordable amount of money over a set period of time.

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Like Bankruptcy, a Government Debt Agreement is not a loan, but simply an arrangement made between you and your creditors to affordably pay off your debt.

Like Bankruptcy, they can help you become completely debt free without needing to pay back the entire amount you owe.

Unlike Bankruptcy, not everyone can qualify for a Formal Debt Agreement.

For those that do, they offer a much more flexible alternative and that doesn’t remain on your credit report forever or require you to sell your assets.

If you have unsecured debts such as credit cards, personal loans, medical bills or taxes and are getting calls from debt collectors, a Formal Debt Agreement could be the perfect solution for you.

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Is a Formal Debt Agreement Right for You?

Formal Debt Agreements are a legally binding alternative to Bankruptcy designed to end the collections calls, freeze interest, and help you become debt free quickly through easy, affordable payments.

Benefits of Formal Debt Agreements include:

  • All interest is frozen on every unsecured debt you have.
  • All collection calls are stopped.
  • Your creditors won’t be able to pursue further court action as long as you keep the terms of your arrangement.
  • They don’t require a good credit history.
  • Affordable payments based on a realistic budget.
  • One single payment covers all your liabilities.
  • Payments can be made according to your paycheck schedule: weekly, fortnightly, or monthly.
  • Your assets are protected as long as you stick to your payment plan.
  • They usually last only four or five years.
  • They don’t affect your ability to run a business or travel overseas.
  • Not all creditors need to agree to the Formal Debt Agreement (only 50.01% of debt value).
  • Formal Debt Agreements bind most unsecured creditors.
  • You won’t need to declare Windfalls, Inheritances, or Compensation Payments once the Agreement has been set.
  • Once completed, all your unsecured debts are effectively settled.

Limitations of Formal Debt Agreements include:

  • You’ll be required to stick to a budget for the term of the Agreement.
  • There are limits to the amount of debt that can be included and the amount of income you can earn to qualify.
  • All your assets and liabilities must be declared when entering the Agreement.
  • Formal Debt Agreements are publicly recorded and will likely appear on your credit report, which may affect your ability to obtain credit.

Formal Debt Agreement Eligibility Requirements:

  • You must be insolvent.
  • You cannot have been bankrupt, entered into a Formal Debt Agreement, or been given an authority under Part X of the Bankruptcy Act in the last 10 years.
  • You must be under set limits specified by Australian Financial Security Authority (AFSA) for unsecured debts, assets, and after-tax income for the next 12 months.
  • Not all your debts can be covered by a Formal Debt Agreement; you will still be required to pay some debts such as fines, child support, auto loans, and mortgages.

If you don’t qualify for a Formal Debt Agreement or need an industry license for your job, an Informal Agreement may be a better option for you. For more information on the benefits, limitations, and eligibility requirements, visit the official Formal Debt Agreement page on the AFSA website.

What is the Difference Between a Formal Debt Agreement and Bankruptcy?

For those that are eligible, Formal Debt Agreements are often preferable to filing for Bankruptcy.
Question Formal Debt Agreement Bankruptcy
Will I automatically lose my car? No, as long as you continue to make payments. Possibly, if it’s worth more than $7,700.
Will I lose my furniture? No. Possibly.
Will I lose my professional tools? No. Possibly, if they’re worth more than $3,750 in total.
If I receive an inheritance, will I be able to keep it? Yes. Any Windfalls, Inheritances, or Compensation Payments you receive belong to the trustee.
Will I be able to travel overseas? Yes. If you’re required to make a trip, you may be able to obtain the permission of the court to do so.
Will I lose my house? No, as long as you continue to make payments. Possibly, the trustee may decide to sell any property you own for the benefit of your creditors.
Do I have to appear in court? No. Possibly, your trustee will decide if there is any matter that requires examination before the court.
How long is information kept in the public record? Any information relating to your Agreement will remain in the public record for the duration of your Agreement or until your obligations are discharged, whichever is later. Any information relating to your Bankruptcy will remain in the public record forever.

How Do Formal Debt Agreements Work?

If you’re eligible for a Formal Debt Agreement, we’ll help you prepare all the paperwork.

We’ll provide you with all the relevant information and documents you need to read and sign.

We’ll also gather all the pay slips, bank statements, and other information needed to file your request.

During this time, you should continue talking with your creditors to explain your situation and ask them to support your Formal Debt Agreement Proposal.

You can also send us their contact information and we’ll talk with them on your behalf.

Once all your paperwork has been finalised, we’ll submit your Formal Debt Agreement Proposal to AFSA, who will then check your eligibility and determine if your documentation is complete.
If everything is in order, the Australian Security Authority (AFSA) will write your creditors informing them of your Proposal, and they’ll be required to immediately freeze all interest and cease all collection calls.

Your creditors will then be asked to provide the amount withstanding on your accounts and the terms of your existing credit agreement.

They’ll also be asked to vote on whether they accept or reject your Proposal.

While all your unsecured creditors have the right to vote, only the majority value of those creditors need to agree.

So if you have $10,000 dollars in debt with 5 creditors, and 3 of those creditors whom you owe a total of $5,100 agree to your Proposal, then the Agreement is legally binding on all 5 of your creditors.

If your Proposal is accepted, you’ll begin making repayments as set out in your Agreement. As long as your Agreement is in effect, all interest on your unsecured debts is frozen and no enforcement action can be taken against you or your property.

Once you’ve completed the terms of your Agreement, you’ll be released from all unsecured debts. And should your circumstances change, you’ll be able to contact us and we’ll help you petition for a change to your Agreement.

If you’re Proposal is rejected, you may be able to resubmit another Proposal depending on the reasons for the rejection. However, if your Proposal is rejected, your debts can begin accruing interest again and your creditors may resume their collection activities against you.

If no Agreement is accepted, you’ll need to consider alternatives such as Bankruptcy.

To learn more about whether a Formal Debt Agreement is right for you, see our FAQ below or click here to contact us today!


  • What does insolvent mean?

    You are considered insolvent if you cannot afford to repay your debts by the time they’re due.

  • Is a Formal Debt Agreement the same as going Bankrupt?

    No, while Formal Debt Agreements are included in the Bankruptcy Act and are considered an “act of Bankruptcy,” they are an alternative to filing for Bankruptcy.

  • What debts can I include in a Formal Debt Agreement?

    Only your provable unsecured debts can be included.

  • What is a provable unsecured debt?

    Provable unsecured debts include those debts not backed by assets such as your car or home.
    Common provable unsecured debts include medical bills, credit cards, and some types of personal loans.

  • What happens to secured debts such as my car loan and mortgage?

    You will need to continue to pay these loans to your creditors directly.

  • What effect does a Formal Debt Agreement have on my debts?

    Once your Formal Debt Agreement has been accepted, a few things happen:

    • All interest on your unsecured debts is frozen.
    • You’ll be required to repay your debts according to the agreed schedule.
    • Once you’ve completed the terms of your Formal Debt Agreement, all debts included in your Agreement will be considered repaid.
  • How long does the process take to complete?

    Once your Proposal has been processed by the AFSA, your creditors are given 35 days to vote on whether they accept or reject your Proposal.

  • Should I continue to pay my creditors during the processing period?

    If you’re able and willing to pay your creditors during the processing period, you’re free to do so, as the debt amount included in your Formal Debt Agreement will be the amount you owe once you’re Proposal is accepted. Remember, however, that you should continue to pay your secured debts the entire time as these are not included in your Formal Debt Agreement.

  • Can you guarantee that my creditors will accept my Proposal?

    No, we can’t.

    It is up to your creditors to decide whether they accept or reject your Proposal, however, we can help ensure you disclose all the required information, properly fill out your Proposal, and suggest reasonable terms so that it has the best chance to be accepted.

  • What are the consequences of a Formal Debt Agreement?

    Your Formal Debt Agreement will appear on the National Personal Insolvency Index (NPII) and will likely be added to your credit report. However, after 5 years (or you’ve completed your repayment obligations, whichever is later) your Formal Debt Agreement will be removed from your credit reports and all your unsecured debts will be considered repaid.

What Happens Now?

If you’re struggling to pay your debts, owe multiple creditors, and are tired of receiving endless collection calls, you have options.

We know exploring those options, filling out the necessary paperwork, and negotiating with your creditors to resolve your debt can be just as stressful as having it in the first place.

That’s why we’re here to provide you with the information and help you need to make the right decision.

If you’re ready to end the collection calls and finally get free from debt, contact us today to learn more about whether a Formal Agreement is right for you.

Contact Us Today for Your Free, No Obligations Consultation

Get Free from Debt Today!