Debt Agreements, also referred to as Part IX (pronounced “Part 9”), are an alternative to bankruptcy. They are a formal legally binding offer to your creditors that allows you to pay back an amount less the full amount of your debt, over a reasonable time. A debt agreement can go for up to 3 years. However, if you own your home, you may be able to propose a debt agreement for up to 5 years. It means making regular repayments over a period of time, matched to your income cycle e.g. weekly or fortnightly. Once the agreed repayments are completed, the full amount of all the debts in the Agreement are extinguished, not just the amount you have paid off.

Who would benefit from a Debt Agreement?

A Debt Agreement may be a good choice for you if:

  • you have significant assets to protect
  • you are a company director and need to remain a director
  • you are a sole trader and want to continue operating your business under a trading name that is different to your full name (e.g. you want to keep trading as Mackeral Park Fish & Chips, not change your trading name to Bill Smith’s Fish & Chips)
  • you have income above the contribution rate for bankruptcy
  • you have numerous debts

Am I eligible for a Debt Agreement?

Debt agreements are only available to individuals who satisfy the criteria and set amounts required by AFSA.

The criteria:

  • You are not currently bankrupt, or in an active personal insolvency agreement, or in an active debt agreement
  • You are unable to pay your debts by the due dates

The set amounts are updated in March and September of each year. As of March 2020 the maximum debts, assets and income for a debt agreement are:

  • Assets* equal to, or less than, $236,126.80; and
  • Unsecured debts equal to, or less than, $118,063.40; and
  • After-tax income equal to, or less than, $88,547.55

*The value of assets includes assets or property that could legally be sold by the trustee if you were to enter bankruptcy (called divisible assets)