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What is a debt agreement?
It is a binding agreement between you (a creditor) and the person who owes you money (the debtor). A debt agreement allows a debtor to pay a percentage of their total debts back over a period of time, based on what they can afford. These agreements can be a flexible way for people to settle their debts.
If accepted, a debt agreement administrator will manage the agreement, receiving the debtor's payments and issuing them to creditors. Find a practising registered debt agreement administrator.
Receiving a debt agreement proposal as a creditor
If you've received a debt agreement proposal, someone who owes you money is making a formal offer to renegotiate payments. They base their offer on what they can afford.
A debt agreement administrator assists a debtor to prepare the proposal. Once we receive the proposal, we will send it to you so you can vote on it (unless you are also the debt agreement administrator or a related entity of the debt agreement administrator). It's important to vote if you wish to express a view on whether the agreement goes ahead.
For creditors to accept the proposal, a majority of the dollar value of creditors need to vote yes.
The proposal you receive should include:
- the proposal
- an explanatory statement
- the debt agreement administrator certificate
- information about voting on the proposal.
During the voting period, most unsecured creditors are not able to try to recover the debt.
To find out more about the proposal, contact the debt agreement administrator.
How long do I have to vote?
For your vote to count, complete the claim and vote form (CAV) online before the voting period ends. You can use the CAV to vote on the proposal and also to provide us with information about your debt if anything in the proposal is incorrect. For more information about lodging your vote online see: Debt Agreements online.
The voting period for proposals to enter and vary a debt agreement is 35 days (except in December when it is 42 days).
The voting period for proposals to terminate an existing debt agreement is 14 days (except in December when it is 21 days).
Your vote will not be counted if we receive it after this date.
What is the voting amount?
The provable debt and the voting amount is the amount owing at the date the proposal is accepted for processing by the Official Receiver.
If creditors accept the agreement
- You must comply with the terms of the agreement.
- The debt agreement administrator receives payments from the debtor and issues them to creditors.
If creditors don't accept the agreement
- Normally creditors can begin or continue recovery action.
- If the debt is over $10,000 you may apply to the court to make the individual bankrupt.
Can I pursue payment during a debt agreement?
If you’re an unsecured creditor you must comply with the terms of the agreement. This means you can no longer pursue the debt or add interest once the agreement begins. There are some exceptions.
Unsecured debts and debt agreements
Being an unsecured creditor means your debt isn't tied to a particular asset. If you're an unsecured creditor, you must comply with the terms of the agreement. This applies to you even if you voted 'no' to the agreement proposal or did not vote at all.
In most cases, this means you can no longer pursue the person for the debt.
There are exceptions when you can pursue a debt during a debt agreement. Some of these include:
- Debts incurred after the agreement started.
- Unliquidated debts - debts where the person has not accepted liability and amount is unknown.
- Joint debts - you are able to pursue your debt from the person who is not in the agreement.
For more information see: Creditor's quick guide - debt agreements and unsecured debts.
Secured debts and debt agreements
Being a secured creditor means your debt is tied to a particular asset e.g. car or home loan.
A debt agreement does not change your rights as a secured creditor.
- You are still able to pursue the person for payment of the debt.
- You may repossess and sell the secured goods if the person is unable to maintain repayments
Receiving payments in a debt agreement
The debt agreement administrator is responsible for providing payments to creditors. Contact the debt agreement administrator for information about payments.
If the person in the debt agreement doesn’t make a payment for six months, the debt agreement may be terminated. Once the agreement is terminated, you may continue to recover your debt.
Confirm someone is in a debt agreement
If you want to confirm someone is in a debt agreement, contact the administrator. If you don’t know who that is, ask the person who owes you money for their administrator details.
If you are unable to obtain the administrator's details, you may wish to complete a Bankruptcy Register Search.
Vary a debt agreement
A debtor or a creditor, in some circumstances, may wish to change (or vary) the terms of a debt agreement. This usually happens if the person can no longer afford to make the agreed payments. This may be due to a change in their circumstances, such as if the person:
- loses their job
- household expenses increase
- has an additional dependant to support.
To vary an agreement you need to submit a variation proposal with us. This should include:
- an explanation of the changes in the person's circumstances
- any communication you've had with the person regarding their changes or payments
- summary of payments in the debt agreement (including if they are in arrears)
Once you've submitted the proposal, we assess it. If we accept the proposal, we send it to all eligible creditors to vote on.
For information on the voting process and proposing to vary a debt agreement see: Official Receiver Practice Statement 11 - Debt agreements.
Next steps
Complete and submit a proposal to vary a debt agreement online. For more information see: Debt Agreements online.
Terminate a debt agreement
If you are a creditor in a debt agreement, it may be possible for you to propose to terminate the agreement. Normally this happens because the person in the agreement is no longer able to make payments. For example if the person:
- failed to start or continue making payments and there it's not likely they will complete the agreement
- had a change in circumstances and a variation to reduce payments is not feasible
- did not disclose their accurate income or employment
- added a significant forgotten debt, resulting in creditors receiving less payments
To terminate an agreement you must submit a termination proposal with us. This should include:
- an explanation of the changes in the person's circumstances, if applicable
- supporting statement
- status report from the debt agreement administrator showing:
- payment history
- arrears and
- the likelihood of them continuing payments
We cannot accept the proposal if the payment are to date.
Once you've submitted the proposal, we assess it. If we accept the proposal, we send it to all eligible creditors to vote on.
For information on the voting process and proposing to terminate an agreement see: Official Receiver Practice Statement 11 - Debt agreements.
Next steps
Complete and submit a proposal to terminate a debt agreement online. For more information see: Debt Agreements online.