What is a debt agreement?

A debt agreement is one of two agreement options available. A debt agreement, also known as a Part IX (9), is a legally binding agreement between you and your creditors[?].

A debt agreement can be a flexible way to come to an arrangement to settle debts without becoming bankrupt.

How debt agreements work

  • You negotiate to pay a percentage of your combined debt that you can afford over a period of time.
  • You make repayments to your debt agreement administrator[?], rather than individual payments to your creditors.
  • After you complete the payments and the agreement ends, your creditors can't recover the rest of the money you owe.

A debt agreement may be a suitable alternative to bankruptcy

  • It can benefit your creditors as they may receive more money than if you were to become bankrupt.
  • It can provide relief if you're unable to manage your debts, but there are some consequences which may affect you.
  • Be aware that there are limits to the amount of debt and income you can have to be eligible.

Debt agreements are not:

  • consolidation loans or agreements to borrow money
  • able to release you from all types of debts—some debts you will still need to pay.

For more information see: What debts does a debt agreement cover?

Before entering a debt agreement

Seek advice

Financial counsellors can help you and are available in every state and territory. Their services are free, independent and confidential. They can provide advice about your financial situation and recommend the best option for you to deal with unmanageable debt. 

To speak with a free financial counsellor contact the National Debt Helpline on 1800 007 007.

For more information on financial counsellors and other support services see Where to find help.

Know your options

A debt agreement is just one formal option available under the Bankruptcy Act[?] to manage your debt. Other formal options include 21 day relief, personal insolvency agreements and bankruptcy. There are also other options available (such as coming to an agreement with your creditors).

For more information see: What are the options?

Understand the consequences

Entering a debt agreement may have a serious impact on you. It may affect your ability to get credit and will appear on a public register for a limited time.

For more information see: What are the consequences of a debt agreement?

Debt agreement fees

We charge a fee for lodging a debt agreement proposal. 

Normally, there are also other fees involved in proposing and managing a debt agreement. 

The fees between administrators vary, ensure that you discuss with them what their fees cover before you decide to go ahead. The total set up fee (which may include the AFSA lodgment fee) and any ongoing fees must be included in your debt agreement proposal.

How long is the debt agreement for?

A debt agreement can go for up to three years. However, if you own your home, you may be able to propose a debt agreement for up to five years. 

In some situations (such as substantial and unforeseen changes) you may be able to extend this to up to five years.