A new federal law commenced on 27 June 2019 – the Bankruptcy Amendment (Debt Agreement Reform) Act 2018 (Cth).
As set out in the Explanatory Memorandum the aim of the law is to tighten up regulation of the debt administration industry and place additional restrictions on debt agreements. Between 2007 and 2016, new debt agreements increased from 6,560 to 12,640 per year. Over the same period, new bankruptcies declined from 25,754 to 16,842 per year.
The key changes to formal debt agreements
Some of the key changes introduced include:
- Imposing a maximum length of 3 years but provides flexibility to be a five-year period in certain circumstances.
- Introduced safeguards which link debt agreement repayments to a specified percentage of income to ensure that the annual amount payable under the debt agreement does not exceed the debtor’s yearly after-tax income by a prescribed percentage (the payment to income ratio).
- Doubling the asset threshold for eligibility to enter a formal debt agreement; and
- Allowing the Official Receiver to refuse to accept a formal debt agreement proposal if they reasonably believe that complying with the agreement would cause undue hardship to the debtor.
While these reforms have some potential to reshape the debt administration industry, a debt agreement may still not be the best way to deal with overwhelming debt because of the long-term consequences, including:
- That the Part 9 debt agreement is recorded on your credit file for 5 years
- That the Part 9 debt agreement is recorded on the public National Personal Insolvency Index (NPII) for 5 years.
Solve My Debt Now
Solve My Debt Now provides a holistic debt relief solution that can be an alternative to immediate insolvency or bankruptcy.
Our debt relief solution aims to achieve any or all of the following outcomes for you:
- Negotiating with creditors to reduce or waive your debt based on your current circumstances.
- Negotiating with creditors to reduce or suspend your interest payments.
- Where successful, avoid leaving a 5-year black mark on your credit file in contrast to the outcome of a part 9 debt agreement or bankruptcy filings.
- Minimises your contact with creditors wherever possible.
- Setting up payment plans with your creditors within your estimated budget to make paying back your debts manageable over time.
We Can Help You – Today
The Solve My Debt Now team are experienced, non-judgmental professionals who work hard to prepare tailored debt solutions for our clients. Contact them today for a confidential chat on 1300 070 672.