Debt Agreement (Part IX)

A Debt Agreement is a formal alternative to bankruptcy where all your creditors agree to accept part payment of the debts in equal proportions. It's made under Part IX of the Bankruptcy Act. You must be unable to pay your debts to be eligible for this type of agreement.

For most people, a debt agreement is not the best option. Speak to a financial counsellor before you sign up to a debt agreement.

Considering a Debt Agreement (Part IX)

Debt Agreements are complex and can have serious and far-reaching consequences. It is important that you get personal, tailored advice before you make any decisions. This page contains simple and general information only.  If you're considering a Debt Agreement, call us on 1800 007 007 for a discussion about your personal situation.

A Debt Agreement is an option that will assist you to tackle unmanageable debt. It is an alternative to bankruptcy. Once debtors have made all the payments and adhered to all the obligations required under the agreement, the debtors are released from most debts.

However, as proposing a debt agreement is an act of bankruptcy, if your creditors don't accept the proposal, they can use it to apply to the court to make you bankrupt. 

In general, you should only consider a Debt Agreement after you have talked to a financial counsellor.  

Debt Agreements are only suitable for people in very specific circumstances. These circumstances include:

  • you have significant assets to protect
  • you're a company director and need to remain a director
  • you have income above the contribution rate for bankruptcy
  • you have numerous debts (although bankruptcy could be a better option depending on other factors)  

How much you pay back

All creditors will receive the same proportion of the amount you owe. For example, if you propose to repay 90% of all your outstanding debts over a three-year period, then all creditors will get 90% of what you owe them.



To be eligible you must be able to demonstrate that you:

  • can afford the proposed repayments
  • have not been bankrupt or had a debt agreement in the past 10 years
  • have unsecured debts of less than a specified amount*
  • have non-exempt assets valued at less than a specified amount*
  • the proposed payments meet a payment to income ratio 
  • expect that your after-tax income for the next 12 months will be less than a specified amount*

The complete eligibility criteria are on the Australian Financial Security Authority (AFSA)'s website.

* Refer to AFSA's Indexed Amounts for these values.

The Debt Agreement can only be for a term of up to three years, or up to five years if you own your own home. 

Beware of aggressive practices

Many debt agreement administrators aggressively promote their services. Some charge very high fees for services that you may not need and some administrators may not work in your best interests. It is essential that you completely understand the consequences of a debt agreement. There may be other options available for dealing with your debt.

Call us on 1800 007 007 before speaking with these for-profit companies.

Risks of Debt Agreements (Part IX)

It's an act of bankruptcy

Making an application for a debt agreement is an act of bankruptcy, which means your creditors can apply to bankrupt you if they don't accept the proposal.

It's NOT debt consolidation

Despite the advertisements for debt agreements often sounding like they're offering debt consolidation, debt agreements are not debt consolidation. They are a formal arrangement under the bankruptcy act.

If you want to consolidate your debts and have already tried a mainstream lender, see a financial counsellor to discuss other options.

Difficult to borrow money

Your debt agreement will appear on your credit report and the National Personal Insolvency Index for:

  • 5 years from the date you enter the debt agreement; or
  • 2 years from the date the debt agreement ends

In practical terms, this means you'll find it difficult to borrow money or get credit for at least 5 years.

High fees

You'll usually have to pay an upfront fee to a debt agreement administrator to enter a debt agreement, plus a monthly administration fee throughout the period of the debt agreement.

Employment restrictions

Professional bodies and/or trade associations may have certain conditions of membership for the duration of the agreement. There may be restrictions on holding some statutory positions during the period of the agreement.

Operating a business

You can operate a business unless the terms of the agreement provide otherwise. But if you trade under a business name or an assumed name, you have to disclose the debt agreement to every person you deal with.

There are no restrictions on being the director of, or otherwise managing, a company.