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.
Like Bankruptcy, a 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.
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.
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.
| 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 $8,000. |
| Will I lose my furniture? | No. | • House hold furniture is able to be kept.. |
| Will I lose my professional tools? | No. | Possibly, if they’re worth more than $3,800 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 from your Trustee 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. |
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 a Registered Debt Agreement Administrator whom forwards this 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!
You are considered insolvent if you cannot afford to repay your debts by the time they’re due.
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.
Only your provable unsecured debts can be included.
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.
You will need to continue to pay these loans to your creditors directly.
Once your Formal Debt Agreement has been accepted, a few things happen:
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.
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.
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.
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.
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.