Varying a debt agreement
Ashley is a 32-year-old self-employed Training Consultant from Belconnen ACT. They are married to Michael, and they are expecting their first baby in the next few months. Michael and Ashley have a mortgage over their home.
A year and a half ago, Ashley lost their job and was no longer able to meet repayments on a personal loan. They entered a four-year debt agreement with their creditors. They were able to propose a longer time period than the normal three years because they were a homeowner.
At the time, a new baby was not planned for and has been a surprise addition to the family.
The family income will drop while Ashley takes maternity leave, and they will not be able to maintain their current debt agreement repayments. They want to continue with the debt agreement but would like to reduce the monthly repayments and extend the time period.
They plan to work from home two days a week when the baby is a couple of months old. This will mean they have some income from which to offer reduced payments to their creditors.
Ashley contacts their debt agreement administrator. The administrator advises that Ashley can propose to vary their debt agreement to five years from the original date. The fortnightly repayments will reduce as the agreement is now for a longer period. They are able to use the variation option because their circumstances have changed, and they can no longer make their agreed payments.
The administrator prepares a variation proposal with Ashley and submits it to AFSA. The administrator confirms that they are likely to be able to meet the new repayments and complete the debt agreement under the new terms.
The varied proposal is sent to Ashley’s creditors to vote. The majority of creditors accept the variation proposal, and the varied agreement comes into effect.
Ashley is pleased that they didn’t need to end their debt agreement just because their circumstances had unexpectedly changed. If they maintains the debt agreement payments, they will get to keep their house!
Note: These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice, if necessary, before taking any action.