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Debt agreements not just a 'quick fix' says broker

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Australian Broker | 26 Feb 2013, 07:00 AM Agree 0
Debt agreements make many brokers shudder - but could the stigma around bankruptcy be fading?
  • Edgar | 26 Feb 2013, 10:47 AM Agree 0
    I can't see why anybody would go into a debt agreement over bankruptcy in the first place. Lenders view it as harshly as bankruptcy and because the terms of payment, say over five years, may be longer than the term of a bankruptcy it can effect your ability to get credit longer. Until lenders start to view debt agreements less harshly (at least the person is making an effort to pay) then the only winners from debt agreements are the likes of foxsymes
  • Malcolm Bartley | 26 Feb 2013, 12:03 PM Agree 0
    Edgar your comments are understandable and reflect the current attitude of most brokers and financiers... Yes a formal bankruptcy might be the right decision for one client but a Debt Agreement maybe a better option for another. It wholely depends upon the individual circumstances.
    There are a lot more people through life circumstances that are now needing the assistance of DAP’s due to loss of income and downturn in the economy – there are also many people who are accessing DAP’s who have mortgages to their limit and bankruptcy is not an option – a DAP is a legal and binding way to insure you can make an offer to pay off existing debts and keep the roof over your head, which would appeal to many people.
    Financiers staff dealing with clients considering entertaining a DAP need to be fully conversant with the regulations and understand the impact on individual clients. Until this happens we dont expect any change in the "Harshness" you refer to.

  • Graham Doessel - MyCRA Credit Rating Repairs | 26 Feb 2013, 12:48 PM Agree 0
    Debt Agreements can be good if your specific circumstances dictate it BUT almost every single person that has contacted us desperate to have us remove the Debt Agreement from their credit rating has told us that they did NOT know it would affect them this badly..

    Many consumers that applied for a Debt Agreement (and were rejected so never even went through with the Debt Agreement) have also contacted us looking for relief as they never for a minute imagined they'd have bad credit from something they never actually did... Only to still be labeled as a Bankrupt...

    The legislation allows that the mere application is enough to record the Debt Agreement act of Bankruptcy on your credit rating for a minimum of 5 years... THIS IS JUST PLAIN WRONG...

    Most people in my opinion that enter into Debt Agreements DO NOT understand the implications and have NOT had the implications and lifetime lasting NEGATIVE effects described in a way that would allow them to make a genuinely INFORMED decision.

    Most people have never even heard of the “NPII” let along know that the NPII records the act of Bankruptcy for your ENTIRE LIFETIME...

    Unless you need to:
    ~ Leave the country
    ~ Be a Company Director
    ~ Be seen as being the major decision maker of a company
    ~ be a share holder
    ~ or a very few other points like these...

    Then in my opinion, there is absolutely NO BENEFIT to entering into an expensive Debt Agreement over a full blown Bankruptcy as the Debt Agreement will most likely remain on your credit file for longer than the full Bankruptcy AND you'll still be locked into paying the debts for many years...

    I fail to see the benefits of a Debt Agreement over Bankruptcy for the majority of consumers...

    A few handy links for brokers and consumers about the consequences of Debt Agreements and other information from 'ITSA' (Insolvency and Trustee Service Australia) ITSA Debt Agreement Consequences ITSA Bankruptcy and Debt Agreement Comparison Table ITSA Debt Agreement Process

  • Malcolm Bartley | 26 Feb 2013, 01:45 PM Agree 0
    It is understandable why the CEO of a “Fast debt recovery” business is an opponent of debt agreements: –
    • nothing fast about an agreed term of repayment
    • same rate of repayment as other creditors
    • no interest being accrued
    • no additional collection charges
    • generally less than 100 cents in the dollar paid
    • no rights to pursue debt by seizure of assets or garnishee
    • debts may revert back to creditors control

    Would hope the comment on length of time is a typographical error, like my surname Bartely not “Bartley” because the following extract from the ITSA site clarifies the term

    A debt agreement under Part IX of the Bankruptcy Act 1966 is a legally binding agreement between a debtor and their creditors. Debt agreements are a flexible alternative to bankruptcy and the action is recorded on the National Personal Insolvency Index (an electronic public register which can be accessed by anyone for a fee). Details may also appear on a record held by a credit reporting organisation for up to seven years.

    Debt agreements have:
    • extra protection for debtors not offered by private or informal arrangements
    • eligibility requirements that you must meet before you can proceed
    • the same rate of payment to all creditors.
    Debt agreements are not:
    • consolidation loans
    • agreements to borrow or loan money
    • able to have you released from all types of debts - some types of debts will still need to be repaid
    • an appropriate solution for all debtors.
    All we are saying is debt agreements should not be overlooked as a method of assisting some clients who are under serious financial stress. Unfortunately most brokers and financiers have a limited understanding of the power of these agreements.

    Anyone considering these agreements should also be aware that different companies charge different fees not all are expensive or inappropriate as suggested by others. Finally a person already in a debt agreement can transfer the management of their agreement from one company to another. Sadly it is true that too many people see these agreements as a quick fix when other alternatives should have been utilized. I would suggest these are the people Graeme from MCRA is speaking to… Remember an individual must be INSOLVENT to apply for relief under a debt agreement. Therefore if they are insolvent why are they applying for finance?
  • Graham Doessel - MyCRA Credit Rating Repairs | 26 Feb 2013, 02:23 PM Agree 0
    Malcolm, I agree that Debt Agreements are the right option in the right circumstances.

    UNFORTUNATELY not all Debt Agreement 'Marketers' take the time to correctly inform their prospective clients of the true ramifications of the whole process...

    If a consumer is aware and then makes an educated decision while taking into account the up side and the down side, then one has to admit that Part IX Debt Agreements do indeed have their place...

    Unfortunately, full disclosure seems to be a problem historically and it is that apparent 'lack' that tarnishes the honest reputable firms with the same brush of those less desirable elements of the past.

    Unfortunately Malcolm, it seems the honest and forthcoming Debt Agreement Firms have been a little harder to find in the past...

    It's frustrating trying to explain to a client that while we have amazing successes in removing defaults, judgments etc, there is almost NO HOPE of getting a Debt Agreement removed even after many lengthy discussions with ITSA.

    Malcolm, I am personally happy to read that it appears you don't charge additional fees to set up or administer the Debt Agreements... It's a nice change.
  • Malcolm Bartley | 26 Feb 2013, 04:41 PM Agree 0
    Hi Graeme thank you for your comments I must clarify that at no time did we state we don't charge fees. We are a commercial business like MyCRA and are required to charge fees to survive. We are not a "Not for profit" organisation like many other groups. However most of these groups do not have access to a Debt Administrator and do not prepare and lodge debt agreements on behalf of their clients.
    I am sure MyCRA charge fees appropriate to the service you provide we are no different. Your organisations efforts in correcting peoples "incorrectly lodged" credit impairments is well worth the expense incurred. I believe our services are the same.
    Again I agree with you that there is a problem with the credit reporting of IX Debt Agreements at the time of lodgement whether they proceed or not and this is something that should be addressed directly with the regulator.
  • Z | 01 Jul 2013, 02:53 AM Agree 0
    Are you able at all to get a debt agreement removed from your credit file and when does the 7 years start from the time your debt agreement is started or after you finish paying it off
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