Debt Agreement NSW: What You Need to Know
If you`re struggling with overwhelming debt, a debt agreement may be a potential solution for your financial troubles. In New South Wales (NSW), this process is known as a debt agreement under Part IX of the Bankruptcy Act 1966.
What is a Debt Agreement?
A debt agreement is a binding agreement between you and your creditors that allows you to repay your debts over a period of time, usually three to five years. It is a formal alternative to bankruptcy and can be a way to avoid the negative long-term consequences of bankruptcy, such as damage to your credit rating and limited access to credit.
Who is Eligible for a Debt Agreement in NSW?
To be eligible for a debt agreement in NSW, you must meet certain criteria, including:
- You must be insolvent, meaning that you are unable to pay your debts as they become due.
- Your unsecured debts must not exceed a certain threshold of $118,760.80 as of 20 March 2020.
- You must have a regular income or assets that can be sold to pay off your debts.
The debt agreement must be proposed by a debt agreement administrator who is licensed by the Australian Financial Security Authority (AFSA).
What are the Benefits of a Debt Agreement?
One of the main benefits of a debt agreement is that it allows you to avoid bankruptcy and the associated restrictions and negative consequences. Additionally, a debt agreement:
- Provides immediate relief from debt collectors and creditors.
- Freezes any interest and charges on your debts from the date the agreement is accepted.
- Allows you to make affordable repayments based on your income and expenses.
- Protects your assets such as your house and car, as long as you keep up with your repayments.
What are the Drawbacks of a Debt Agreement?
While a debt agreement can be a helpful solution for some, there are also some potential drawbacks to consider. These include:
- A debt agreement can negatively impact your credit rating, making it harder to take out loans or credit in the future.
- You will not be able to borrow more than $5,447 without informing your creditors of your debt agreement.
- If you fail to meet the repayment obligations outlined in your debt agreement, your creditors can take legal action against you to recover the debt.
- Your name will be listed on the National Personal Insolvency Index (NPII).
It`s important to carefully consider your options and seek professional advice before entering into a debt agreement. Your debt agreement administrator can provide you with more information on the benefits and drawbacks specific to your situation.
If you`re struggling with overwhelming debt and are considering a debt agreement in NSW, it`s important to seek professional advice before making any decisions. A debt agreement can be a positive step towards financial freedom, but it`s important to understand the potential consequences and ensure that it`s the best solution for your unique circumstances.