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What Is A Part IX (9) Debt Agreement?

Rachel Horan

Rachel Horan

May 24, 20215 minute read
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If you have unmanageable debt, there are a few options you can consider. While bankruptcy is often a common way to resolve debt, an alternative option is a Part IX (9) Debt Agreement.

On this page:

    In this article, we cover what you need to know about Part IX Debt Agreements, how it compares with declaring bankruptcy, and some debt management tips.

    What is a Debt Agreement?

    A Debt Agreement, also known as a Part IX (9), is a legally binding agreement between you and your creditors to settle your debts. Debt Agreements are administered in accordance with Part IX (9) of the Bankruptcy Act of 1966, hence the name.

    With this agreement, you can negotiate to pay a percentage of your combined debt over a manageable period of time. These repayments are then made to your debt agreement administrator, instead of to each individual creditor.

    If you’re unable to pay back all of your debts and considered ‘insolvent’, a Part IX (9) Debt Agreement can be a good option to consider. This is because once you have paid back the agreed amount of your debts, your lenders are unable to recover any additional debt that may have been owed.

    How do you enter a Part IX (9) Debt Agreement?

    You can enter into a Debt Agreement for a set period of time, generally from three to five years. In order to be eligible for a Debt Agreement, you must meet the following requirements:

    • Currently insolvent;
    • Have not been bankrupt, entered into a Debt Agreement, or given an authority under Part X (5) of the Bankruptcy Act in the last ten years;
    • Be under set limits specified by Australian Financial Security Authority (AFSA) for unsecured debts, assets, and after tax income for the next 12 months.

    You will need to meet with a debt agreement administrator that will set out a plan to negotiate with your creditors on your behalf. When you have read, agreed to, and signed all of your paperwork, this information is then sent to the AFSA. They will process the proposal after conducting an assessment. The AFSA will then communicate with your creditors that you have submitted a Debt Agreement Proposal.

    How is a Debt Agreement different from bankruptcy?

    While both are monitored under the Bankruptcy Act of 1966, a Debt Agreement is not exactly the same as declaring bankruptcy. Instead, it is an act of bankruptcy. This means that if the creditors reject your proposal, they can apply to bankrupt you.

    In a Debt Agreement, you agree to repay as much debt as you can reasonably afford. Debt Agreements are typically seen as less severe as declaring bankruptcy. When you declare bankruptcy, you’re declared unable to pay your debts and released from most debts. You can enter into bankruptcy voluntarily by completing a Bankruptcy Form. Otherwise, a creditor that you owe money can make you bankrupt. Bankruptcy typically lasts three years and one day.

    Part IX (9) Debt Agreement vs. Bankruptcy: a comparison

    In order to understand the differences between a Debt Agreement and bankruptcy, we list the consequences of both in the table below:

    Bankruptcy Debt Agreement
    You stay bankrupt for three years. A Debt Agreement is listed on your credit report for five years or more.
    Your bankruptcy stays on your credit file for five years. You must tell new credit providers about it if you owe more than the credit limit.
    You are permanently listed on the National Personal Insolvency Index. Your name is on the National Personal Insolvency Index for five years or more.
    A trustee looks after your affairs. May not be able to work in certain professions.
    Required to ask your trustee for permission to travel internationally.
    You can’t be a director of a company without permission from the court.
    Might be restricted or unable to work in certain trades or professions.

    As you can see, a Debt Agreement can be less severe than declaring bankruptcy. However, neither option should be entered into lightly as they both can have negative implications for your credit score.

    It is important to note that with both Part IX (9) Debt Agreements and bankruptcies, a creditor can refuse to be included and, instead, repossess the asset used as security on their personal loan. However, this will depend on each individual lender.

    Alternatives to a Debt Agreement

    If you can avoid entering into a Debt Agreement, it may be worth exploring other options. These options include, but are not limited to:

    • Asking your creditors for more time to pay;
    • Negotiating a flexible payment plan;
    • Offering a smaller payment to settle your debt;
    • Entering an Informal Debt Agreement;
    • Taking out a consolidation loan to combine your debts.

    Debt management tips

    Having multiple debts can often feel overwhelming. Before deciding that all hope is lost, you can try some strategies to help you get your debt under control:

    Overhaul your debts and create a budget

    If you have multiple debts with different lenders, you may be finding it hard to track your repayment dates. This can result in late fees or defaults.

    By doing a debt overhaul, it allows you to clearly visualise how many debts you currently have, how much you owe, and when each repayment date is. With this information, you can create a budget taking into account your current income, expenses, and repayments. This allows you to track your debt, get a better idea of when you’ll be debt free and budget accordingly.

    Make extra repayments when you can

    Interest is a big factor in how much you owe on your loan or credit card overall. With some lenders, they don’t charge you interest if you make extra repayments. This means that instead of slowly chipping away at your overall balance, your repayments are only going towards paying off your borrowed money. The more repayments you can reasonably make, the less you owe and the faster you can get out of debt.

    Consolidate your debts

    If you are finding it hard to manage your loans, credit cards, and any other credit you may have, it might be helpful to consolidate your debts. A consolidation loan allows you to simplify all of your different repayments into one payment plan. This saves you the hassle of remembering different repayment dates and interest rates. It also gives you a clearer picture of when you can pay off your loan.

    Helpful resources

    If you are struggling financially, it can be helpful to speak to a financial counsellor. The National Debt Helpline offers a free and confidential financial counselling service. Lifeline has a number of centres that offer financial counselling support services.

    • National Debt Helpline | 1800 007 007
    • Lifeline | Call 13 11 14 | Text 0477 131 114

    Copyright © www.jacarandafinance.com.au Jacaranda Finance Pty Ltd ® ABN 53 162 078 195 Australian Credit Licence 456 404, Pawnbroking License Number 4221738. The information on this web-page is general information and does not take into account your objectives, financial situation or needs. Information provided on this website is general in nature and does not constitute financial advice.


    Rachel Horan
    Rachel Horan

    Written by Rachel Horan

    Rachel Horan is a Content Writer for Jacaranda Finance. Rachel has previously produced content for Brisbane City Council, Black & White Cabs, and Clubs Queensland. She has a Bachelor of Mass Communication with Distinction from the Queensland University of Technology.

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