Struggling with debt and unsure about the differences between an Informal Debt Arrangement vs Part 9 Debt Agreement? Both options can help manage repayments, but their impact on your financial future varies significantly. Let’s break down the key differences, pros, and cons to help you make an informed choice.
Key Difference: Legal Status
The most critical distinction is that an Informal Debt Arrangement operates outside the Bankruptcy Act 1966, while a Part 9 Debt Agreement is a legally binding alternative to bankruptcy under the Act. This difference has major implications for your credit file, flexibility, and long-term financial health.
Learn more about Part 9 Debt Agreements via the Australian Financial Security Authority (AFSA).
Impact on Credit Files: Why Informal Arrangements Shine
Part 9 Debt Agreement
- Listed on your credit report for 5 years, even if repayments end sooner.
- Lenders often treat it similarly to bankruptcy, making it hard to secure loans, credit cards, or mortgages during this period.
- Many borrowers regret the extended credit damage long after completing their agreement.
Informal Debt Arrangement
- No negative listing on your credit file.
- Creditors may note a “hardship arrangement” (per 2014 regulations), but this is not a default and has minimal impact.
- Preserve your credit score while repaying debts—ideal for those prioritising future financial flexibility.
- Understand how credit scores work via Equifax’s Guide.
How They Work: Structure & Creditor Approval
Part 9 Debt Agreement
- Requires 50% creditor approval (by dollar value) to bind all parties.
- A licensed administrator distributes payments to creditors.
- Fixed terms and legal protections, but rigid and credit-damaging.
Informal Debt Arrangement
Flexible, customisable, and avoids formal insolvency markers.
All creditors must agree to terms individually.
Managed by a trusted third party (like Just Budget), who negotiates affordable repayments and distributes funds via a secure trust account.
Why Choose Just Budget for Informal Debt Help?
We specialise in creating win-win outcomes through Informal Debt Arrangements. Our team:
- Negotiates affordable payment plans with creditors.
- Avoids credit file damage to protect your financial future.
- Handles disbursements securely via trust accounts, similar to formal agreements.
While Part 9 suits some, most clients achieve the same debt relief without bankruptcy ties through informal solutions.
Final Verdict: Informal Debt Arrangement vs Part 9 Debt Agreement – Which Is Better?
If preserving your credit score and flexibility matter, an Informal Debt Arrangement is often the smarter choice. Reserve Part 9 for cases where creditor disputes or complex debts require legal enforcement.
However, when considering Informal Debt Arrangement vs Part 9 Debt Agreement, it’s essential to assess your financial goals and long-term stability. An Informal Debt Arrangement provides more control and less impact on your credit file, whereas a Part 9 Debt Agreement offers a legally binding structure that can provide relief for those struggling with unmanageable debts. Carefully weigh the pros and cons to choose the best option for your situation.
Need Help? Let Just Budget guide you. Explore your options or contact us today for a free consultation.
