Struggling Aussies increasingly turning to debt agreements

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Australians experiencing severe debt problems are increasingly turning to debt agreements over bankruptcy, with a recorded increase of 68% in debt agreement numbers since 2007.

Insolvency and Trustee Service Australia (ITSA) figures show bankruptcies declined 20% between January 1, 2007 and December 31, 2012, with 150,353 bankruptcies recorded during this period.

During the same time frame, however, there were 49,034 new debt agreements made, representing a 68% increase.

Reforms to the Bankruptcy Act in 2007 in the form of the Bankruptcy Legislation Amendment (Debt Agreements) Act 2007, aimed to improve the operation of the debt agreement regime.

Attorney-General Nicola Roxon says debt agreements provide better outcomes for someone’s financial circumstances, and may allow those people in debt the chance to save their home.

“Debt agreements in many cases can be the smarter way forward, especially as bankruptcy can leave a financial legacy that can affect people for years.”

But CEO of MyCRA Credit Rating Repair, Graham Doessel, says it’s important for consumers to know that both options are part of the Bankruptcy Act 1966, and therefore when proposed or implemented record a bankruptcy notation on the consumer’s credit file.

“A formal debt agreement may be a nice form of bankruptcy, but make no mistake – it is still part of the Bankruptcy Act 1966. Both options will impact a consumer’s credit file and ability to obtain credit for seven years. But what’s more, the debtor will be allocated a bankruptcy number, which remains part of their credit history for life.”

The debtor’s name and other details appear on the National Personal Insolvency Index (NPII), a public record, for the proposal and any debt agreement.

 “You can’t get away from this notation, and answering the question ‘Have you ever been bankrupt or entered into a debt agreement?’ incorrectly constitutes fraud.”

From March, 2013, the Consumer Credit Legislation Amendment (Enhancements) Bill 2012 will take effect, allowing for greater ease of request for financial hardship variation.

However, Doessel says it’s important for people not to bury their head in the sand, and to recognise and address financial difficulty early.

“By catching it early and avoiding a default, writ, judgment or bankruptcy on your credit file, when you’re back on your feet you could have the option to borrow again.”

 

 

  • Dean on 19/04/2014 8:26:26 AM

    I too went into a Part IX agreement, which I have now paid off. I would like to know if the seven year period referred to throughout this blog applies from the moment the agreement is entered into or does the seven year period apply from the date the agreement is finalised?

  • John C on 10/04/2014 3:16:30 AM

    Zac, If you are applying for a high LVR loan where mortgage insurance is required you will definitely hit a snag. If your partner has the income capacity to support a proposed loan facility then that is certainly an option. However if your partner does not have the capacity without your income assistance, if you are able to keep your borrowings down to under 75% Loan to Value ratio (where a number of lenders dispense with Mortgage Insurance) you should be able to find a non-conforming lender who will assist you. You will no doubt be reamed with a weighted risk rate, however if this gets you into the property market, you can always refinance with a Tier One lender once your credit infringement has disappeared. Speak to your local mortgage broker and see whether they have any non-conforming Lenders on their panel. If you are having no joy let me know what area you are located in and we will refer you to an advocate who should be able to assist you. In the meantime have a look at www.smallbusinessparty.org.au as one of their platform policies is the addressing of how your credit file information is used and they are strongly advocating for amendment/clarification of Section 18f of the Privacy Act 1988 to remove the issue of the continued "punishment" of victims after they have paid or satisfied a debt through the CRA's own misinterpretation of this piece of legislation. Support them to help you. Let us know how you go with your local Mortgage Broker.

  • John C on 10/04/2014 2:53:04 AM

    Well ALL, a New political party has been established and one of their priority policies on their platform is to correct the injustices that the current Privacy Act 1988 (as amended March 2014) is causing and will continue to cause. Help them to help you. Go and register with them and better still, sign up and be a member to voice your concerns and get change happening. www.smallbusinessparty.org.au These people have a real issue with the way the various Credit Reference companies manipulate the information that is held, in particular after any alleged debts have been paid or settled. Show your support to get change. The listing of alleged debts / overdue payments after 7 days under the new revised APP in march this year is just ludicrous and plainly idiotic particularly when big business and GOVERNMENT take up to 90 days (and sometimes more) to pay their bills at the expense of the little person. Whats this world coming too, particularly in Australia. Just plain lunacy by the previous Government and if the current Government does nothing to reverse this, then they deserve to be a one term wonder!

  • Tony Brownlee on 9/04/2014 8:03:47 AM

    Forget it! While Veda and others continue to impose a penalty upon you by holding your default or 9 when paid or settled for the maximum permissible period of 5 years as against removing same when paid or settled, there is little or no hope the place will be a wasteland lacking in small business as so goes the jobs!

  • Zac on 9/04/2014 5:32:00 AM

    Can anyone suggest to me my options if any in obtaining a loan to buy a house once I have paid my part 9 debt agreement off! I was unaware of the full extent as to what the consequences would be entering into this agreement. I have since started a good paying job and am renting for what it might cost to buy a house. I have been and have paid off my debt much quicker than required n should have it wrapped up by mid next year. Is it worth pursuing a home loan after that or shall I concentrate on trying to see if my partner can borrow as she would have a stable credit rating?

  • John C on 11/03/2014 9:26:39 AM

    Dee,
    If you look further down in one of my other posts you will see an address that you can use to make contact so we can refer you to an Advocate in your area. Cheers, John

  • Dee on 10/03/2014 6:59:53 PM

    Hey John C (or anyone else),

    Can you make any recommendations on who to talk to in Brisbane? I'm about $25k in debt and can't pay any of it off each week but these horror stories are completely putting me off the debt agreement. I'm 30 and would love to start getting ahead in life!

    D

  • Maree on 6/03/2014 5:15:05 PM

    Wow I feel like such an idiot, I did NOT properly research this, and all of the 3 debt agreement providers I spoke with said my credit rating would be fine again after the 7 year period, and once the debt was paid even if before the 7 year period I should still be able to get a mortgage! Not one of them mentioned that the insolvency record would remain forever and potentially impact on my capacity to get credit or a mortgage again. I feel stupid! Thank you John for your advice though - luckily I am still in the voting ('cooling off') period and have already contacted one of my creditors and they have been agreeable to a hardship arrangement which means an affordable amount to pay (comparable to the debt agreement) with suspended interest for that period. Once they knew that I was a potential bankruptee (er?) and willing to set up a direct arrangement to save my credit rating they became a lot more flexible! I have 3 weeks to get to my other creditors to agree to come to the party before I can cancel the debt agreement proposal, even though I now know that the proposal stays on my record forever too! This lesson will cost me $1,950 in professional fees for the business I chose to lodge my proposal. Hard lesson.

  • Broker on 28/02/2014 10:30:30 AM

    Thanks John & Paula , your comments are greatly appreciated

  • John C on 27/02/2014 11:57:01 PM

    Broker, My understanding is that the 5 year period still stands. However the interpretation of 18f of the Privacy Act is not in accordance with what the original framer's of the act would have envisaged. That's my issue with how the various CRA's manipulate the information just so they can benefit themselves to the detriment of the people who are affected by this information.

  • Paula on 27/02/2014 10:17:35 PM

    I checked out oaic and found this info
    "When will personal information that was included on an individual’s credit report before 12 March 2014 be removed?
    The new credit reporting laws (the new laws), which commence on 12 March 2014, regulate what personal information can be included on an individual’s credit report, and how that information can be handled. This includes how long that information can be retained on an individual’s credit report.

    From 12 March 2014, any personal information permitted to be included on an individual’s credit report must be handled in accordance with the new laws. This includes personal information that was in a credit report before that date. This means that the new laws will determine how long that information can be held on an individual’s credit report.

    How long information is permitted to be kept on an individual’s credit report varies depending on the type of information. Under the new laws, some of the retention periods have been shortened, while others are unchanged. Importantly, once the relevant retention period ends, the personal information must be removed from the individual’s credit report within 1 month.

    Where the retention period has been shortened, the new shorter retention period applies. Importantly, the new retention period will apply from the date that information was first included on the credit report, and not from the 12 March 2014. This means, for example, that any information included on an individual’s credit report prior to 12 March 2014, for which the new retention period has expired, must be removed by 12 April 2014, even if the old retention period may not have expired.

    As well, personal information that does not meet the criteria in the new laws for inclusion on an individual’s credit report or is not covered by the transitional provision in paragraph 5.1 of the new credit reporting privacy code cannot remain on an individual’s credit report after 12 March 2014. An example of this would be defaults of less than $150."
    Thanks again for all your help

  • Paula on 27/02/2014 10:11:11 PM

    Thank you all for you help and advice.

  • Broker on 27/02/2014 12:43:53 PM

    So does the new positive credit reporting info and changes to the privacy act mean that defaults will never disappear from a credit file, or will their credit file be clean again after 5 years from the default listing?

    Hoping someone can answer this

  • jo on 27/02/2014 10:41:54 AM

    Hi All,
    I used to work in finance and am still in the industry and have a couple of pieces of advice.
    Always approach your lender/lenders first if you keep your arrangements then in general they will assist.
    Approach your superannuation company - if you have outstanding lialbities they can in certain circumstances release some of your super to asssist in the payments.
    Bankruptcy and part nine can also impact future employment - particularly in the industry.
    There are some very good financial counsellors from Salvos etc that can help with budgets and communication with companies you owe money to. Some of these companies can also assist you with making the final decision regarding bankruptcy and can assist you without the high costs, i think one is Moneycare.
    There is certainly some situations where bankruptcy/part nine is the best option but seek good advice first.

  • John C on 27/02/2014 10:04:41 AM

    Rachael, Thank you for clarification. Even so these amendments are are way out of whack and the new legislation still draconian in its current form. The whole business of the Privacy Act (in particular Section 18f), Bankruptcy Act etc has to be completely revisited and changed.

    Cheers,

  • Rachael on 27/02/2014 8:17:00 AM

    Hi, just thought I would help out as I have been doing extensive research on the changes. The changes will be retrospective. This is confirmed by the information on the government oaic site.

  • Arron on 25/02/2014 8:05:27 PM

    Very happy to find this conversation and that there is an effort to change the unethical practice of some companies and the immoral BS that exists here in Australia.

  • John C on 25/02/2014 1:24:34 AM

    Paula, I am unable to comment about the reduction of the publishing time frame with implementation of the revised Privacy Act. This due to come in on or about 14th March 2014 and I am not sure if the five period relates to fresh infringements or whether existing infringements are retrospectively amended. I will clarify this and post this on the blog in the next day or so.

    In relation to being approved for a loan with an 80% debt to valuation ratio with a finalised Part ix still showing on your credit file will be up to the credit criteria of the individual lender. If any of the lenders use LMI (Lenders Mortgage Insurance) then there is a good chance that you will be refused. However if you are able to increase your deposit % to 25-30% where the lender does not have to engage LMI then your chances of securing a loan facility with a lender without the need for LMI will be more likely. Given the that the competition has started to hot up in recent months there is a more than reasonable chance that you will get facility that you require. It will be very important to show your savings history and other regular payments you make such as Rent etc to demonstrate that you have no issues in meeting your commitments. Your local Mortgage Broker should be able to assist you. If you don't have one go to www.fbaa.com.au and select a broker member in your area that you can contact and have a chat!

    My concern is that the existing credit infringement may still be an impediment!
    John C

  • Paula on 22/02/2014 9:57:14 AM

    I went into a debt agreement in 2009 paid it off by 2011. Since then have saved 50k deposit but been told that ill need 20% before any major lender will consider me. Say end of this year I have 20% deposit, the part 9 is still on my Veda file until 2016. So will I still only be able to go through the specialist lenders at the high interest rates or will major lenders consider me at lower interest rates? Also when are they going to reduce it from 7 years to 5 years on your credit file? And will that apply to people who already have it on their credit report?
    Thanks

  • Paula on 22/02/2014 12:54:48 AM

    Help & advice needed!
    I entered into a debt agreement in 2009 same as others was unaware of the part ix, I paid off this debt in 2011 and I have sinced saved 50k for a deposit for a home. Which is 10% at moment. I have been to a broken & basically said I will need minimum of 20% deposit before any if the major lenders will look at me. However my part ix is still on my Veda file until 2016. My questions are: so say by the end of 2014 I have 20% deposit. Will the major lenders look at me favourably or and I still going to have to go to a specialist lender with the high interest rates? And also was reading earlier posts about the change from7 years to 5 years on your file for part ix, when will that happen and will they apply that to people who already have it on their Veda file?

  • John C on 5/02/2014 10:40:27 AM

    Sophie, yes your name is recorded on the NPII for eternity unfortunately. You pose an interesting question and I am not sure of the answer. Legally even though you have changed name by Deed (marriage for example) you are still the same person. However unless you advise your Debt Manager or Trustee of the name change they will be none the wiser and if the records are not updated then your former name will remain listed.

    With your credit file, the various Credit Reporting Agencies will pick up your old file when you make any new credit enquiries under your new name, as most States when changing your Drivers license details such as change of name you will still retain your original Drivers License number. Most of the Credit Reporting agencies will have a process in place where they get a match on one common piece of information on a fresh new file such as a Drivers License Number, will employ additional algorithims of at least three pieces of informtion to confirm the change of name such as Given Names, Date of Birth, Address history, Employer etc to validate that you are one and the same person. Should this algorithim get three matches then the Credit Agency will when creating the new credit file for your new name will lodge a notice that there is another person on file with details that match and show this file on your new credit file as an Alias. This will then allow the credit provider checking your file to review the other file to determine if this other file belongs to you. The old file will be also updated with the details of your new file under your new name. A double whammy!!

    You need to be aware that many finance applictions ask if you have been known by any other name and have you ever had credit issues in the past. Failure to answer these questions accurately and it is found that you have misled the financier with your answer/s is a serious offence.

    I trust this answers your question although I do need to check the position about the change in name where you are in an existing Debt Agreement or Bankruptcy administration.

  • Sophie Madam on 2/02/2014 3:47:55 PM

    Id like to know if you enter into a debt agreement 9 or bankruptcy and your name is recorded on NPII permanently - Say you got married whilst in midst of your debt agreement & name is on NPII, do your debt records transfer automatically to your new marriage name? Or when you get married, is it a whole new credit file? And will your old credit file prevent you and your married partner from obtaining credit anywhere because of the file on your maiden name? #curious

  • John C on 17/01/2014 6:12:43 PM

    Hi Jade,

    My contact details are at the bottom of my previous post. Drop me a line and I will refer you to an Advocate who can discuss your position and suggest some options for you to consider.

  • Jade on 17/01/2014 2:13:55 AM

    Hi John C
    I'm wondering whether you are able to help me sort out/find a solution to pay my debts off? I'm having trouble sleeping at night.
    I live in Adelaide, would you happen to know anyone in SA that might be able to help me sort out my situation?
    TIA

  • John C on 6/01/2014 9:44:40 PM

    Hi Sharon, Debt Agreements do have their places I agree, as long as you are aware of the consequences then that is fine. The major issue I can see from the majority of people who have posted on this blog is the lack of information provided by the organisation that advocated a Debt Agreement as a solution which became a short term fix and a long term disaster for them. There are other ways of resolving these issues using the law to your advantage. However in your case if the Debt Agreement resolved your issues and did not (and continues not too) affect your financial position then that's fabulous news. You will be one of the rare species that have this view.

    Jane, I forgot to mention in my previous post that I am located in the Sydney region.

    Cheers, John C

  • Sharon on 1/01/2014 10:05:57 AM

    I entered into a debt agreement (6 years ago) and it was the best thing I ever did. I was over my head in debt and struggling what to do. Every time the phone rang or there was a knock on my door I freaked. Yes, I know it's on my credit file but it was something that help me out.

  • John C on 26/12/2013 1:55:39 AM

    Jane,

    I am a former Finance/Mortgage Broker and Mortgage Originator and have taken the decision to exit the industry after some 25 years of giving my life to it. The reasons for exiting were numerous, in particular the draconian legislation brought in by the former Federal Government which has been in my opinion in the main a massive retrograde step. I don't have an issue with continuing education etc, this is essential, however the new and additional regulatory imposts placed on small businesses operating in this sector in my view no longer make is a profitable business to remain. It also gives the power back to the "big end of town" such as the banks and takes away the competitive edge of the small boutique lenders which in turn disadvantages the customers/clients.

    Having been in the industry for so long I have seen a tremendous amount of change (or lack of changes as times change) and I have taken this on to assist people who may have been caught in the trap to resolve their issues and get a clean start.

    Most borrowers do not know their rights and enter into arrangements and find out too late there was another way of doing things. The issues of debt agreements and other resolutions that maybe available is a pet subject of mine. Now I DO NOT advocate that people should shirk their financial responsibilities and it should always be your intent to honour your agreements/arrangements where you can. However circumstances can change and with that it maybe become an impossibility to continue with your intentions. Unfortunately "CRAP" happens and in most cases it will be the result of circumstances outside your control. Many people will have the resources to deal with these changes and good on them for doing so. However there are many people who do not have access to these resources or do not have the monies needed to access these resources. My interest , which is why I contribute to this forum, is to see the latter be able to get some suggestions for alternative directions. I have a particular issue with Section 18f of the Privacy Act and the Bankruptcy Act as these current sets of legislation are way out of date and negative in their structure. I have a distinct dislike of Debt Agreements (Part iv & x's ) and I believe until legislation is changed there are better options to consider which will not ruin your credit history for seven years (on the odd occassion these maybe the only option).

    We are in the process of establishing a Not for Profit Association to be named "Don't Die for your Debts". This also covers assisting people to deal with stress & worry of debt levels that they do not believe they can jump over. I am happy to provide recommendations for you to take to your legal advisor's as anything in this area needs to be done in conjunction with independent legal advice. If you would like a referral to an advocate please drop a line to debtrelief at fcxcorporate dot com and see if we are able to point you in the right direction.

    Regards, John C

  • Paul on 18/12/2013 3:38:04 PM

    Entering into the Part IX was by far the biggest mistake I made.

    I was shattered when I later found out the even applying for a Part IX was recorded on my credit file. Had I known this, I would have NEVER even put in an application, I would have stayed working 3 jobs to make ends meet for a couple of years than do this. I'd strongly encourage people to be well informed about what a Part IX or Debt Agreement is before signing it.

    However, I believe in my favour I do have a mortgage to which I have been honourable with, however I am led to believe now, that this will not matter in the future anyway because of the NPII - is this correct?

    I am full of regrets these days, 29 and credit scarred!

  • Jane on 11/12/2013 9:58:16 AM

    John, who and where are you?

  • Ricky on 14/11/2013 3:15:39 PM

    Kylie. You gave me one good news that they are changing the legislation of debt agreement from 7 to 5 years. That s good. I don't see any point now not to get any loan or credit despite committing to paying to my previous creditors. I see debt agreement same as bankrupcy in terms of negative impacts it has over you in your credit file. I want to buy a property now, but cannot because it hangs in my file for next 3 years. Whereas my friend who declared himself bankrupt was able to buy property ater 2 years of his declaration. You can travel as well with permission of your trustee, and generally they let you to. But everyone's circumstances are different. One advice though; try not to be trapped into debt settlement agencies. They charged me$6,000 fees to settle agreement of $12,000. I could have saved that fees amount if I would have gone myself or AFSA. Try to save this money by having AFSA as your trustee.

  • Kylie on 14/11/2013 1:16:20 PM

    Thanks Ricky for your reply. Can you explain to me why it was the biggest mistake of your life? They are changing the legislation for debt agreement to be on your file for 5 not 7 years, so that is one differentiation. I understand it still will still show under the Act of Bankruptcy but doesn't it look better if you commit to pay it off rather than go bankrupt? I don't have any assets, but my greatest concern is the travel restrictions of bankruptcy, i don't want that to be hanging over my head in the event I do want to move overseas at some point. I'm definitely thinking that debt agreement is more favourable? So your explanation would be valuable to me. Thanks

  • Ricky on 14/11/2013 11:10:42 AM

    Kylie. I was in the same situation and I took out debt agreement, consider now as one of the biggest mistake I have ever made. Circumstances change, so don't sacrifice your present for future which might be bright.
    If I were you, I would talk to creditors for hardship payment plans or options. But if you want to get rid of it, and you don't own a house, shares or big assets, and you don't plan to run a business as a director, consider bankrupcy over debt agreement. Think about debt agreement many times before signing it.

  • Kylie on 13/11/2013 3:40:26 PM

    I would love some advice as now I am really confused with what decision to make. I have 36K in debt and have struggled with it for years. I am confused with whether to take out a debt agreement or bankruptcy after reading all these comments. I am currently not working so feel I have no other option. I am extremely stressed and would appreciate any advice. Thanks.

  • John C on 30/10/2013 1:19:43 PM

    Ricky, Yes Tony b's comments strike a chord for sure. The legislation that controls this area of the Privacy Act, Bankruptcy Act, Credit Act all needs to be reviewed, overhauled and changed and brought into line for todays environment. Some of this legislation is 50 years old and not relevant in today's business environment.

    In answer to your question once you have entered into a debt agreement you can't revoke/undo it. If you read between the lines of Tony b's comments there are some possible solutions that can be considered, if you feel that the current arrangements you have in place are not suitable. I will see if I can find an address I can refer you to where you can seek the assistance of an advocate.

  • tony b on 30/10/2013 12:02:28 PM

    forget all this debt agrement stuff, if you do not own property, shares or any other hard assetts and your veda file is blistered by one or more defaults, then just lodge a debtors petition declaring yourself bankrupt! The current manner in which Veda and others addopt and apply their version of the Privacy Act (Comm) 1988 does not generate the slighest incentive for anyone to pay their debts! i say, Veda,s interpretation as it is their incorrect interpretation of Section 18F of the privacy Act (Comm) 1988 that causes harm and loss to creditors the parties they profess to act for and support and who are in fact their members but in reality their behaviour supports their business only. Paing your debts once the debt or debts have been listed on your Veda file, is useless and and of no benefit to you. Veda will thought tell you that you have a moral obligation
    to pay your debts! What to bloody Banks! where are the Banks morals?

  • Ricky on 29/10/2013 2:46:50 PM

    John. Thank you for the advise you gave me regarding Part IX. I am unable, as you stated, to find a suitable solution. Can you direct me if there is any solution for part IX to be revoked somehow. If I chose to pay off my creditors by directly engaging with them, is it possible that debtagreement is revoked from my file earlier than it has to finish in next five year? Thank you

  • John C on 2/10/2013 12:23:35 AM

    Ricky, in answer to your question I believe this has been addressed in the post back to Samantha. If you have already entered into a Part IX arrangement, your options to "fix" this are limited. This forum is not designed to provide advice, as everybody's circumstances will be different and as such you should contact your legal professional for advice (even though many of these so called professionals unfortunately have not got a clue) as to your options. As stated previously a Part IX does not prevent you from legally engaging credit such as purchasing property, however the negative listing on your credit file will make it challenging to find a financier to assist you whilst the listing remains published on your credit file, and most certainly if the Part IX has not been satisfed/completed. As a suggestion, if you are not successful in obtaining the information and advices that you require, please come back to this forum and let us know (or even if you are) and I maybe able to point you in a direction where you can get some assistance. I am also aware of a group of very concerned business people who are most worried at the impact of the draconian credit reporting laws in this country where there are now increasing incidents of people inflicting self-harm to themselves because they have nowhere to turn for assistance, support or advice. This group I am aware are in the process of setting up an "Non Profit" Support Association which is to be named something along the lines of "Don't Die for your Debts" or similar. Should this association eventuate I will publish it here. In the meantime I trust the information above assists you.

  • Ricky on 1/10/2013 12:23:45 PM

    I have also been a victim of a profit making financial firm, suggesting that Debt Agreement is the best place to land for a total sum of $30,000, which I might have settled myself (if I would have been smart enough at that time). I have been so unfortunate not to talk to a broker or a proper financial expert before I talked to the company who gave me false impression that I will be perfectly fine after I pay off my debts.
    They post these very nice and pretty advertisement online which appeal people like me to "get rid" of financial difficulty, and not telling on phone when contacted about the consequences of it.
    My question is, can I please be advised what to do if I want to make it right. Apparantly I am unable to buy a property, already spent two years of Part IX so for next five years, still not eligible to buy or borrow.
    What options do I have to make it right? Just sit quite and wait for another five years?

  • John C on 26/09/2013 11:44:11 PM

    Samantha,

    No you are not bankrupt by entering a Part IX. A Part IX is a debt agreement administered by a registered manager. However as it falls under the Bankruptcy Act, think very carefully about entering into such an agreement as this will be listed on the NPII forever and on your Credit Files held by the likes of Veda and D&B for seven years thus making it difficult to obtain finance (or being penalised with a rate loading) during this period even after you have finalised the agreement. Please seek INDEPENDANT professional legal advice and NOT be persuaded by the sales process of the various Debt Agreement Management companies who would encourage you to take this route unless there are no other options. If it is only the one credit card debt (depending upon the amount of this debt) it should be possible to reach a suitable agreement with the provider, particulurly with the assistance of your lawyer. You are still able to legally engage credit whilst under a Part IX agreement, however most lenders will not advance a loan as the listing will be shown under an "Act of Bankruptcy" on your credit file. The answer to your question is; no it will not prevent from buying a property in the future, however this experience would surely dictate as to what legal structure you may want to put in place to protect your assets in the future. If your credit card debt is humungous and you can't jump over it then you may need to look at another strategy to resolve it, however in my world I would look at another option rather than a Part IX if at all possible.

  • Samantha on 25/09/2013 5:36:08 PM

    If I enter a part 9a debt agreement does this prevent me from becoming an property owner in the future? I am getting told so many things I need to confirm it is correct. I only have a credit card to pay off and my circumstances have changed. Im worried that I am being declared bankrupt?

  • John C on 10/09/2013 8:01:27 PM

    Nick, you are not prevented from entering into a residential lease if you are under a Part IX or Part X. Both these types of Debt agreements are simply a Management arrangement and not a Sequestration of Bankruptcy where your estate comes under the control of a Bankruptcy Trustee. So if you want to move out of home and go get your own pad go for it!
    Under the current draconian Privacy Laws any act of Bankruptcy (which Part IX & X's fall under) will remain on any file held on your name by the various Credit Reference Associations (Veda Advantage and Dun & Bradstreet being the major ones) for a maximum period of seven years. After this period of time the act states that this information must be removed from your file. However the NPII (National Personal Insolvency Index) will keep a record of this forever. Most lenders will (in particular if they use the services of a Mortgage Insurer) will use this listing to either refuse your finance application or penalise you financially for your history even if the reasons for your predicament were caused by Force Majeure. Once the seven years is up, these listing will drop off and your credit history file will be clear.

    Yes your GUT feeling is right. What a shame you didn't know me before you got yourself into trouble. Using the legislation at your disposal we could have resolved your financial issues, keep you credit rating clean and clear (or had it cleaned up within a very short period of time - certainly substantially sooner than 7 years). The number of people I come across who have entered into Debt Agreements who in my opinion either did not need too or should have taken a different path due to bad advice or misguided opinions from well meaning friends is simply astounding.

    Trust this clarifies your position for you.

  • Nick on 9/09/2013 11:34:27 PM

    I entered into a Part IX Debt Agreement back in March this year due to about $50K in credit card and store card debt. The agreement is over five years and I understand that it will affect my ability to go for a loan on credit for the next seven years. But can anyone please tell me if it will affect my ability to apply for a rental property if i was to move out of home within the five years or even after the next seven years? Also after the next seven years is finished, how will this affect my ability to obtain credit? I'm asking because I was told by the debt company i did this through that my ability to obtain credit after the seven years is up should be ok. Plus i've got a gut feeling that i should have taken a different road.... Any wisdom, advice or harsh words to bring me to reality on this would be greatly appreciated.
    Thanks

  • John C on 10/08/2013 9:29:13 PM

    Deb and Andrew, let me answer your question 1st Deb, I bet the people who told you it would be a big NO NO to submit a Debtor's Petition were the people who are administering your Part XI/X facility! Of course they would tell you it's a big NO NO because if you did, they would suddenly lose their humongous fees they are gouging out of your estate which should be going to your creditors. If you feel that you need to submit a Debtors Petition then by all means do so. Go and get some independent advice for heavens sake. The Debt Agreement listing stays on your credit file for seven years anyway so you might as well end it and clean the slate out, and start fresh in three years time as there is no benefit in trying to do the right thing when there is no encouragement to do so. You can always go back to your Bankruptcy Trustee when you are on top of things and make an offer to settle the estate and get your Bankruptcy annulled, which under the Act means it is a legal fiction and if asked the question have you ever been bankrupt your answer can with hand on your heart a resounding NO! Think of yourself first and use the law to your advantage. The way the current legislation is drafted why bother in trying to do the right thing when all that will happen is that these self righteous people suggesting this cause of action will just step on you like a dog again.

    Andrew, the short answer to your question is NO. Once the NPII has your details on file it is there for the rest of your life!! However your question poses an interesting scenario which I will investigate and if there is a solution I will get back to you here.

  • Andrew on 8/08/2013 5:39:32 PM

    Is there anyway to have a Part X agreement removed from the National Personal Insolvency Index?

  • Deb on 1/08/2013 9:16:02 PM

    Hi l am another person taken in by thinking a debt agreement was the right way to go. I thought at least im attempting to pay my debts, little to know that l am now struggling week by week to pay the normal everyday living expenses eg rent, electricity food petrol etc luxuries like a night out or once in awhile go to the pictures is completely off the budget. I even inquired if l could change from debt agreement to bankruptcy apparently that is a big NO NO so here l go having to pay back for 5 yrs and with the over $7,000 fees put on top of my debts i still have 2 and half years to go of living nearly as bad off as l was before l entered into this debt agreement. Please people think very hard l only wish l went bankrupt the reason behind my debt problem was my husband had a heart attack and could no longer work thus loosing his wage. Just a question am l being told the truth that l cannot change to bankruptcy apparently because l own a car valued at $10,000 which was brought before debt agreement and has since been paid off as it was not included in debt agreement

  • John C on 12/06/2013 1:27:58 PM

    Change the legislation. Even the new "revised" legislation due to come into play next year is draconian and a severe impost on borrowers civil rights. The way in which Credit Reporting is managed in this country is frightening. There is nothing positive in any of it. John's comments above are absolutely spot on. Given where we are heading no one will be able borrow money for their needs. We voted this idiotic government in so we are now paying the price for this situation occuring.

  • Lynne Gray on 11/06/2013 2:53:46 PM

    We were badly advised that a part 1x would definitely not affect our future home loan application.
    We have never been in debt and we only owed $25000.
    Now we have been refused further borrowings, by Anz,who we have had a mortgage with for 15 years, because of the part 1 x

  • Anton on 29/01/2013 12:41:19 PM

    I entered into an agreement by mistake and am now paying for it hard. I'm 30 years old, I have no future, I can't apply for credit anywhere, My fiance left me because of this stress.
    i have no assets to borrow against to wipe this stupid debt from my credit rating. I have worked in my job for the last 3 years. If anyone can offer me advice on how i can repair credit, perhaps put a complaint into the creditor who signed me up when i was struggling financially years ago, please email me.
    anton.lay@dsmelbourne.com

  • Kev on 21/01/2013 10:08:15 AM

    Do you guys understand that when someone owes $80,000.00 on their credit cards and that their statements tell them that by paying the minimum payment it will take 109 years to finish the debt that no borrowing for 7 years is pretty attractive.

    Its easy to give advice when you don't have to lug the millstone around on your neck.

    Brokers seem to always whinge that people's credit ratings are going to be affected. Maybe its just the best thing for a person so that they can get their life back on track.

    You guys just want them to have a clear rating so you can flog them more money. It looks like you are the instigators of all these problems.

  • John on 18/01/2013 2:13:02 PM

    The whole issue of Debt Agreements (part X and IX's) and the way it marketed by many promoters is paramount to fraudulent and dishonesty against their clients. I see many such arrangements when these clients should never have been sold this type of solution. However, the lawmakers of this country have framed the Acts so they are the Rules we have to play with. My business is now utilising the current law to assist clients to minimise the impact of what is still draconian legislation which buggers the financial lives of those effected for up to seven years. The whole legislation needs to be amended as the current legislation does not provide any incentive for a financially stressed person to do the right thing and I do not blame them.

    Even the way that the Credit infringements are handled on Credit Bureau Files give absolutely NO incentive for a borrower to do the right thing once they have been listed as there is no reward provided if they do.... An animal will always do what you want it to do if you reward it. Humans are no different.......

    Jack's righteous comments on morality above is in my view typical of a person who has never found themselves in compromised financial position and would have NO idea the stress and strain it places on the affected person, their families, their lives and the rest damage it does to reputations etc.

    Companies such as FS & others exploit the law to make a business out of it, and that's business.

    Change the legislation which gives hope and encouragement to do the right thing, rather than hang onto the typical Australian Convict Mentality of while the dog is down keep kicking it, for which we Australians are so unfortunately famous for.... It is also Nanny statism which this current government cherishes to control their constituents.

    The whole issue of the Privacy Act, Bankruptcy Act and how Debt Stress is handled needs to be revisited and completely restructured..... However I am unlikely to see this in my life time so I will continue to assist my clients to minimise their damage even if it is not morally correct!! Want to change the legislation to make it positive instead of the negative it currently is, I am first in line to promote it!

  • Positive Broker on 18/01/2013 1:56:07 PM

    Couldn't agree more with Graham Doessel. Debt agreements may be fine for some people but if you look at the websites of some of the companies offering this service they very rarely make it clear it is a bankruptcy event. Misleading to say the least.

  • JacK on 18/01/2013 11:28:00 AM

    Whilst there is a legitimate place for debt arrangements in any civilized society, encouraging consumers to enter into Debt Agreements or Bankruptcy (as is evident in Australia) disclours the moral & ethical obligations of people to fulfill what was promised by them i.e. 'repay what you owe'. What kind of society are we promoting by encouraging people to 'go bankrupt'? A sick one, I might suggest. The moral bankruptcy rests with those companies promoting this malpractice. Are you listening Fox Symes !!!

  • Richard on 18/01/2013 10:45:55 AM

    I own a micro lending business as well as a home loan broking business. I always wish clients would talk to me before entering into a debt agreement. I would advise them to go bankrupt before a debt agreement. However the best strategy is to enter into an arrangement with creditors, not a debt agreement for the reasons Graham Doessel outlines in the article. I will always stop charging interest and will accept as little as $10pw. Most creditors will enter into an arrangement so long as the person does what they say. They would be far better to see an accountant to work out a budget and repayment strategy and for the accountant to contact and make an arrangement with creditors. From the creditor's perspective, a small regular payment is better than bankruptcy and receiving nothing. The important thing for the client is to act before it is too late and too hard.

  • Edgar on 18/01/2013 9:57:50 AM

    It's any wonder so many people get bad advice to go into these sort of agreements when even the Attorney General gives the impression that debt agreements won't affect your credit rating like a traditional bankruptcy. And they are promoted so much lately, I see at least two or more adverts each night on TV ..."Have you got more than $8,000 debt we can help.....". I had one client recently who'd gone into a debt agreement where she paid out the debt over five years, she was discharged from it two years later than if she had gone bankrupt and paid nothing back. Effectively by paying the debt instead of wiping it off she ended up worse as it was an additional two years before main stream lenders would even consider her

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