Varying a debt agreement
Ashley is a 32 year old self-employed Training Consultant from Belconnen ACT. She is 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 her and was no longer able to meet repayments on a personal loan. She entered into a four year debt agreement with her creditors. She was able to propose a longer time period than the normal three years because she was a home owner.
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 she will not be able to maintain her current debt agreement repayments. She wants to continue with the debt agreement but would like to reduce the monthly repayments and extend the time period.
She plans to work from home two days a week when the baby is a couple of months old. This will mean she has some income from which to offer reduced payments to her creditors.
Ashley contacts her debt agreement administrator. The administrator advises that Ashley can propose to vary her debt agreement to five years from the original date. The fortnightly repayments will reduce as the agreement is now for a longer period. She is able to use the variation option because her circumstances have changed and she can no longer make her agreed payments.
The administrator prepares a variation proposal with Ashley, and submits it to AFSA. The administrator confirms that she is 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 she didn’t need to end her debt agreement just because her circumstances had unexpectedly changed. If she maintains the debt agreement payments she will get to keep her house!
*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.