A debt agreement, also known as a Debt Settlement, is a simple method for you to enter into a legally binding agreement with your creditors. It is a negotiated compromise with your creditors which could result in:

• a payment of less than the full amount of all your debts;
• a moratorium on payment of your debts;
• a transfer of property from you to one or more of your creditors in full or part payment;
• periodic payment of amounts out of your income to your creditors, either collectively or individually.

You may be eligible for a Debt Agreement if you:

• Have not been bankrupt, utilised a debt agreement or given an authority under Part X of the Bankruptcy Act in the last 10 years;
• Have after Tax Income of less than $52,907 p.a.
• Have Unsecured debts of less than $70,543;
• Are insolvent.

Debt agreement is not the same as debt consolidation where you simply transfer balances from high interest charging accounts to one low interest charging account.

A debt agreement freezes provable unsecured debts upon acceptance of your debt agreement proposal by creditors. This allows you to pay back the debts over an extended period of time at an amount per week you can afford.

Not all your creditors have to agree. The majority in number and at least 75% of the dollar amount of those creditors who decide to vote, and are entitled to vote, have to agree to your proposal.

Although debt agreement may seem like an attractive first option as opposed to debt consolidation, you must always remember that since it is considered a bankruptcy prevention program it will adversely affect your credit rating.

Both the debt agreement proposal and the debt agreement are registered on the National Personal Insolvency Index (NPII). Baycorp Advantage, the credit-reporting agency uses the information on the NPII to advise any creditors that you are under a debt agreement and/or have submitted a debt agreement.

A creditor can also register a default against your name with Baycorp Advantage.