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Informal Debt Arrangements and Debt Agreements

Informal Debt Arrangement

An informal debt arrangement is where we work with you to develop a plan to manage your debt. We liaise with your creditors for favourable payment terms, with the aim of reducing interest and the balance. We can help you by then managing your payments for you, and you pay one simple payment to us. You still have to pay out your debt, but we do all we can to minimise the costs and make it easier for your to deal with multiple payments.

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Formal Debt Agreements

A debt agreement, also known as a Part IX (9), is a legally binding agreement between you and your creditors. In simpler terms, it is a formal, flexible and managed plan devised to settle your debts by paying an affordable amount of money over a period of time. People who are struggling with a debt but can’t get a loan to assist them are eligible for a debt agreement.

When entering a debt agreement, you are negotiating to pay an affordable percentage of your combined debt over a set period of time. These repayments are made to your debt agreement administrator rather than separately to your creditors. Once the term is up and you have successfully complete your payments, the creditors will not be able to recover the rest of the money you owe.

Informal Debt Agreements and Debt Agreements are NOT:

  • Consolidation loans or agreements to loan money
  • Able to release you from all types of debts – there are some you will still need to pay

Pros/Cons of Formal Debt Agreements

  • Interest and charges on your unsecured debts are frozen
  • Your creditors will not be able to pursue any further court action, given you keep to the arrangement terms
  • An alternative to declaring bankruptcy.
  • The agreement binds most unsecured creditors
  • Repayments are tailored to suit your budget
  • Once you enter an agreement, the amounts you owe to the creditors will not change
  • Debt agreements are recorded on a public register and will likely appear on your credit file
  • You have to stick to a budget as part of the terms for this agreement​
  • All assets and liabilities are to be declared.

Pros/Cons of Informal Debt Arrangements

  • We can help negotiate your current credit terms
  • This will not affect your credit longer term as much as a Formal or Part IX Debt Agreement
  • We can manage your payments for you
  • You only pay us one payment and we pay your creditors for you, so you can relax knowing that your debts are being managed
  • Informal debt arrangements do not appear on the public register and are less likely to appear on your credit file
  • You still need to pay off your debt under the arrangement
  • You don't have to declare all assets
  • You have to stick to a budget as part of the terms of the arrangement.
Just Budget can help point you in the right direction.
If you wish to know more or would like to pursue an informal debt arrangement or a Part IX Agreement, contact us today.

If you need further clarification on debt agreements and how they may affect your circumstances, contact AFSA Australian Financial Security Authority which is the Government agency that is responsible for overseeing the operation of the Debt Agreement Scheme.

From Our Blog

Why a Debt Agreement is Better than Bankruptcy
bankruptcy

Why a Debt Agreement is Better Than Bankruptcy

When people are faced with extreme amounts of debt and don’t have enough funds to repay all of these debts, the most common thing they do is declare bankruptcy. However, recent figures show that Australians are favouring debt agreement more than bankruptcy due to its obvious less extreme consequences.

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