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Debt Agreement

  

Case Study

  


A debt agreement is a negotiated compromise with your creditors, which, if agreed to by your creditors, becomes legally binding.

It enables you to pay off your debts on a weekly, fortnightly or monthly basis at an amount that you can afford.

Find out more about Debt Agreements below:

  • What kinds of arrangements can be put in place?
  • Who can enter into a Debt Agreement?
  • What does insolvency mean?
  • Is a Debt Agreement the same as going bankrupt?
  • What does a Debt Agreement do?
  • Do all creditors have to agree to my proposal?
  • Can you guarantee that my creditors will accept my debt agreement proposal?
  • Will I be able to make one payment per week to all my unsecured creditors?
  

Tracey had a relationship break down and was left with a large amount of debt after struggling for months to pay her debts unsuccessfully.

After being fed up with all of the harassing calls from creditors, she decided that she needed to take action.

She had well paid employment but due to the extremely high interest on her unsecured debts, she was behind on everything.

She was referred to Smart Link by a previous client; we immediately called all of her creditors and told them that we were acting on Tracey's behalf and to direct their calls to us when possible.

We then followed up that call in writing; we do this to take pressure off you the client.

Tracey's debts totalled $41,000 her minimum monthly repayment was $1,557.

 

What Kinds of Arrangements can be put in Place?

The following arrangements/proposals can be put in place:

  • A payment of less than the full amount of all or any of your debts
  • A moratorium on payment of your debts
  • A transfer of property from you to one or more of your creditors in full or part payment
  • Periodic payments of amounts out of your income to your creditors

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She wanted to honour her debts and didn't want to go bankrupt.

A snapshot of her accounts revealed the following:

Debt Agreement - Case Study figures

 

Smart Link assisted Tracey in the preparation and submission of a Debt Agreement.

A Debt Agreement is a formal arrangement between Tracey and her creditors.

The Debt Agreement would mean that Tracey would have to pay $495 each month for 4 years to her creditors. In total she would pay her creditors $24,600.

Her creditors would agree to waive all interest on their debt and accept $24,600 of the $41,000 they were owed or 60c in the dollar as full and final settlement of their debt.

At the end of 4 years Tracey would be debt free.

  

Who Can Enter into a Debt Agreement?

A debt agreement can be proposed by you if you:

  • Have not been bankrupt, utilised a debt agreement or given an authority under Part X of the Bankruptcy Act in the last 10 years
  • Have an after tax income of less than $71,539.65 per annum
  • Have unsecured debts of less than $95,386.20
  • Are insolvent

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What does Insolvent Mean?

A person is insolvent if and only if they cannot pay their debts as and when they fall due.

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Is a Debt Agreement the Same as Going Bankrupt?


No, a debt agreement is an alternative to bankruptcy. However by submitting a debt agreement proposal you are committing "an act of bankruptcy".

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What Does a Debt Agreement Do?

A debt agreement freezes provable unsecured debts upon acceptance of your debt agreement proposal by creditors. This allows you to pay back the debts over an extended period of time at an amount per week you can afford.

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Do All Creditors Have to Agree to My Proposal?

No, not all creditors have to agree. The majority of the dollar amount of those creditors who decide to vote, and are entitled to vote, have to agree to your proposal.

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Can you Guarantee that my Creditors will Accept my Debt Agreement Proposal?

No. It is your creditors who decide whether they accept or reject your proposal. However as a debtor your responsibility is to make full and complete disclosure of your financial position, put forward the best offer you can and commit to complying with the terms of the proposal.

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Will I be Able to Make One Payment Per Week to All my Unsecured Creditors?

Yes, we will set up a weekly payment system by way of direct bank debit.

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Smart Link Finance are specialists in this industry with over 15 years experience - act now - we are only a phone call away.