Debt Agreements - Options to Bankruptcy
What is a Debt Agreement?
-
A debt agreement is made when creditors
accept a proposal from a debtor to pay or finalise his/her debts
over time
-
It is a simple, low cost and flexible
alternative to going bankrupt.
Who is involved in a debt agreement?
A debt agreement administrator must be appointed
to:
-
inform the debtor of the consequences of a
Debt Agreement
-
assist the debtor to complete the paperwork
and lodge it with ITSA
-
make sure the terms of the Debt Agreement are
carried out after acceptance by creditors.
The administrators can be a registered trustee, an
advisor, a debt agreement administrator (a person or company), a
friend, or the debtor. Businesses may charge a fee for giving
information and for setting up and administering the proposal.
ITSA is an Australian Government Agency
responsible for the administration of the Bankruptcy Act, which
includes responsibility for Debt Agreements. ITSA can also act as a
debt agreement administrator or as a trustee in bankruptcy.
What are the advantages of a Debt Agreement?
-
The debtor is not bankrupt
-
The Debt Agreement proposal shows what each
creditor is likely to receive
-
Creditors are more likely to receive a
dividend than if the debtor becomes bankrupt
-
The debtor is released from most unsecured
debts when creditors vote to accept the Debt Agreement proposal.
Who can propose a Debt Agreement?
To be eligible to lodge a Debt Agreement proposal, the Debtor
must be insolvent (unable to pay their debts).
Debtors cannot propose a Debt Agreement if they:
-
have been bankrupt, had a Debt Agreement, or
given an authority under Part X of the Bankruptcy Act in the
last 10 years, or
-
have unsecured debts over $70,543 (indexed),
or
-
have assets over $70,543 (indexed), or
-
have an expected after-tax income for the
next 12 months of more than $52,907 (indexed).
What can be offered to creditors in a Debt Agreement proposal?
A proposal may include, for4 example
-
a moratorium or delay on payments to
creditors for a specified period of time
-
transfer of an asset from the debtor to
creditors in full or part payment
-
sale of an asset with the funds received
being paid to creditors
-
a lump sum payment divided amongst creditors
-
weekly or monthly payments from the debtors
income to a fund which is divided amongst creditors
-
a specific dividend of so many cents in the
dollar to creditors
-
money from the sale of an asset that will
become available in the future
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