The term ‘debt agreement’ is enough to make many brokers run for the hills. In proposing a debt agreement, clients commit an act of bankruptcy – and creditors can use this to apply to court to make the debtor bankrupt if the proposal isn’t accepted by creditors.
Roger Mendelson, CEO of Prushka Fast Debt Recovery, is an outspoken opponent of debt agreements, telling Australian Broker they constitute no more than a bottom-of-the-barrel option for debtors ‘in deep’ and possibly facing legal action.
“Debt agreements are made pursuant to Part IX of the Bankruptcy Act and are recorded on the debtor’s credit file for five years and will be recorded on the ITSA [Insolvency and Trustee Service Australia] data base – which is a public record.”
Furthermore, he argues, the debtor will find it ‘almost impossible’ to get credit during the term of the agreement.
“…For the rest of his life, he will face the question on credit forms ‘have you ever entered into an arrangement pursuant to the Bankruptcy Act?’ He will need to answer this honestly and this will always be a black mark.”
This, however, is where things start to get interesting.