Formal Debt Agreement
At Fix Bad Credit, it’s our job to make sure you will be alright. If you have had enough of those annoying phone calls, emails, and letter from the debt collectors, the team at fix bad credit can make them stop as soon as you are ready.
We start by listening to your situation, and ensure you are aware of all your options for debt relief. Once you decide which option is best for you, we are more than happy to work with you, continuing to make the process as pain free as possible.
Our experienced staff are highly skilled in taking care of all the uncomfortable requirements for you throughout the entire process, so you can get on with living your life. We continue to work with you to ensure, when it’s time to come out the other side, you are in the best financial shape possible.
One of the options available to you is a …
A Formal Debt Agreement
If you’re struggling to get on top of your debt, are being harassed by creditors and your credit history is preventing you from entering into an informal debt arrangement such as debt consolidation, then a formal Debt Agreement might be an option for you. A formal Debt Agreement, also known as a Part IX or Part 9 Debt Agreement, is an alternative to Bankruptcy.
A formal Debt Agreement helps you deal with unmanageable unsecured debts such as credit cards or personal loans. Your debt will likely be reduced to an agreed amount and the remainder you will be able to pay back through affordable regular periodic or lump sum payments.
An alternative to bankruptcy, a formal legally binding Debt Agreement is where your creditors accept a plan to repay an amount over a set period of time that you can reasonably afford.
People often turn to bankruptcy as the first option when struggling with their debt. However, you may be surprised to learn it’s not the only option. If informal debt arrangements are not available to you, a formal Debt Agreement is an alternative to declaring bankruptcy.
A Debt Agreement cannot release you from all types of debts. A Debt Agreement only includes unsecured debts. There are some debts you’ll still need to pay. An unsecured debt is a debt which is not backed by collateral or an asset, in other words, they have NO security attached to them. Examples of unsecured debts include credit card debt, personal loans, bills, or tax debts. A mortgage or a car loan are NOT unsecured debts as they are backed by an asset (the house or car that you used the money to purchase).
What are the advantages of a formal Debt Agreement?
A formal Debt Agreement can:
- Freeze your interest rates on unsecured debts
- Prevent further legal action against your unsecured debt
- Enable you to be released from your outstanding unsecured debt once the agreed payments have been made
- Enable you to make affordable repayments
- Help you avoid Bankruptcy
Whilst entering into a Debt Agreement is considered an Act of Bankruptcy it is not actual Bankruptcy. Instead, a Debt Agreement is designed as an alternative to Bankruptcy that may protect your assets. As long as you keep up with any asset repayments you may have, such as your car and home loan, as well as your Debt Agreement repayments, your assets should be protected.
A Debt Agreement will be listed on your credit report for up to five years from the date you enter into it, which may impact on your ability to get credit over that period. However, once completed you are free to get on with living your best life.
We recommend you explore all your options before entering into a Formal Debt Agreement to ensure you make the best decision for you. We also suggest you seek financial advice to check your payments are affordable.
What happens with a Formal Debt Agreement?
When you enter into a Debt Agreement, you negotiate with your creditors to pay a percentage of your debt based on what you can afford over time (often within three to five years).
You will make your regular repayments, which could be weekly, fortnightly, or monthly, to a Debt Agreement Administrator, instead of paying the individual creditors. Your Debt Agreement Administrator then distributes the payments to your creditors for the amounts agreed.
Once you’ve completed payment and the agreement ends, your unsecured creditors cannot try and recover the rest of the money that was originally owed.
Fix Bad Credit can help you to come to a Debt Agreement with your creditors, finding you a solution that enables you affordably pay back what you owe.
What is a Debt Agreement Administrator?
When you apply for a debt agreement, you must nominate a debt agreement administrator.
A debt agreement administrator is the person who manages the agreement. They work with you, and your creditors, to achieve a fair and reasonable outcome for all. During your agreement, you have an obligation to provide information to your administrator, including changes to your circumstances.
The Fix Bad Credit Difference!
The team at Fix Bad Credit are well versed in formal debt agreements.
We work with you, to take away the pain, and ensure that you focus on your life outside of debt.
Our experienced team will stop the phone calls from debt collectors, and creditors, they now become our problem.
After coming to an understanding of what you want to do, our friendly administrator will work for what’s best for you, when addressing your creditors, and payment arrangements.
You will continue to have the same debt specialist throughout the process, so you don’t have to deal with anyone you aren’t comfortable with. Our process is all about making sure the entire process is as pain free and comfortable as possible for you.
Once you are in a Debt agreement, our service doesn’t stop there. We work with you to ensure that when the time comes for you to come out of the Debt agreement, you are in the best financial shape possible.
What are some of the alternatives to a Formal Debt Agreement?
There is no “one size fits all” when it comes to financial hardship. Everyone’s situation is different and likewise debt arrangements comes in all shapes and sizes. Your Fix Bad Credit debt expert will conduct a comprehensive assessment of your unique financial situation to determine the debt solution option that would work best for your circumstances.
Formal Debt Solutions
There are other formal options for managing your debt under the Bankruptcy Act 1966, each having benefits and serious consequences. They include:
- Personal Insolvency Agreement – A Personal Insolvency Agreement is a formal, legally binding arrangement that is between you and your creditors to satisfy your debts. The arrangement could consist of a contribution of your income over a period of time or an assignment of your assets. It is the last option considered before filing for bankruptcy. Find out more here.
- Bankruptcy – Bankruptcy is the formal process of being declared unable to pay your debts. When you become bankrupt, you don’t have to pay most of the debts you owe. Find out more here.
Informal Debt Solutions
If you’re having difficulty making your repayments, you may want to try to reach an informal agreement with your creditors. Whilst informal debt solutions are not legally binding, they are likely to have fewer serious consequences than formal debt arrangements. Your creditors may be willing to:
- Give you more time to pay your debts
- Give you a lower interest rate
- Charge you fewer penalties
Informal debt solutions could involve one, or a combination, of the following:
- A Debt Moratorium, also known as a payment holiday or payment deferral, to either stop or reduce your payments and interest over a short period of time (usually between 3 to 12 months) to enable you to get back on your feet or to put other arrangements in place.
- Debt Consolidation – by bringing your existing multiple debts together into one single new loan, subject to a single interest rate, with a single regular (usually monthly) repayment it makes managing your debts significantly easier.
- Debt Negotiation – this involves discussions with your creditors to informally renegotiate the terms of your loan, this might mean settling the debt for less than the full amount, lower interest rates, reduced fees and/or extending the length of the loan to reduce the size of your minimum payments.
- Debt Settlement – If you have access to a lump sum, a debt settlement may help. A debt settlement is an informal arrangement with your creditors that offers less than the full amount you owe in order to wipe out the debt completely.
- A longer-term informal arrangement– a long term informal arrangement can last several years and often involves reducing your minimum repayments, reducing or freezing the interest owed over the period if you need more time to get back on your feet or to put other arrangements in place.
What do you need to know before entering into a debt repayment agreement?
Understanding the terms of any debt arrangement, both formal and informal, is critical before agreeing to anything. Ensure you have enough information to be able to select an option which is most favourable to you, so your financial situation isn’t impacted even further. Don’t be afraid to ask questions. If a part of the agreement or contract is unclear to you, make sure to clarify anything first before signing on the dotted line. We recommend you talk to a debt expert about your options.
For more information on what might be the best option for you, call one of Fix Bad Credit’s debt solution experts on 1300 729 757. Our debt solution experts can help you assess your financial situation for free and identify debt solution options tailored to your specific personal financial circumstances, using their in-depth knowledge of credit law and debt processes.
Debt is one of the few stressors in life that doesn’t go away. The worry is always there, along with the feeling that there is nothing that can be done about it. Money and debt worries cause heavy emotional and mental burdens, affecting your health, your work, and your relationships. But just know you’re not alone. If you’re feeling overwhelmed by money matters, we’re here to help you find relief from your debt stress. Talking about debt can be daunting. It’s hard to know where to start or what your options are. However, you can take a small step right now by picking up the phone.