A debt agreement is an alternative to declaring bankruptcy and provides a solution for those with unmanageable debt. This agreement is Part IX of the Bankruptcy Act and is a legally binding agreement with the credit provider and you advise the amount and terms that you can afford.
Once you have met these terms, you are released from most of your debt. However, when preparing your offer for the credit provider, you need to be realistic. You will need to think about what the credit provider will be willing to accept, what you are able to afford and what will happen if your situation changes down the track.
Am I eligible for a debt agreement?
There are several circumstances where you may be eligible for a debt agreement. These include:
• Have not had a debt agreement or been bankrupt in the last 10 years
• Unable to repay debts when they are due
• Have unsecured debt less than $103,121.20
• Have after tax income of less than $77,340.90
What are the benefits?
There are several advantages of the Part 9 debt agreement, some include:
• You may be able to have the amount of debt you owe reduced
• You can have a temporary delay or suspension arranged for debt repayments
• You can set the repayment amount based on what you can afford
• You don’t have to declare bankruptcy
Although this agreement can keep you from becoming bankrupt, it is important to remember that if you do not fulfil your obligations outlined in the agreement, it will be automatically terminated and your only option will be to file for bankruptcy.
Can I apply for a home loan with a debt agreement?
If you are currently in a debt agreement, you may find it difficult to obtain a standard home loan. When you enter into a debt agreement, it will be shown on your credit report. This means that some lenders may consider you too much of a risk. However, you may be eligible for a home loan with a specialist lender.
In order to give yourself the best chance of obtaining a home loan, you should take the following steps:
• Save a deposit of 20% or more of the purchase price
• Build a strong repayment history by paying all bills on time
• Develop a strong savings history and employment history.
Also, if you are able to provide a reasonable justification for why you entered into a debt agreement (such as a sudden illness or loss of job) it may improve your chances of obtaining a home loan.
Need help with getting a home loan? If you are finding the above confusing then don't despair. State Custodians have experienced lending specialists who can do the calculations for you and discuss which home loan options would be right for you. Just call on 13 72 62.