Debt Agreements Vs Bankruptcy

Bankrutpcy or Debt Ageement?

What is the difference between a debt agreement and bankruptcy?

When people fall into bad debt, they can utilise a number of debt relief options to help them with their troubles. Often it comes down to the following options: a debt agreement vs bankruptcy.

If you have been having a hard time with debt recently, you might be aware of the term “debt agreement”. A Part 9 Debt Agreement is a legally binding agreement between your creditors and yourself. It outlines a new, affordable repayment arrangement. It pauses your interests and fees and allows you to repay only a percentage of each dollar you owe to repay your debts.

Whether bankruptcy or a debt agreement is a better option comes down to one’s personal situation. Whilst it may be more beneficial for certain people to declare bankruptcy, it comes with a number of long-term consequences and restrictions which make it a very difficult option for others to go after.

For example, if you are a homeowner, you might prefer to enter a Part 9 Debt Agreement to hold on to your house.

Keeping Debt Agreement to Protect your Home

But if your debts are out of control and you don’t have a steady income source, bankruptcy is the only viable option.

Understanding Bankruptcy, as a respected bankruptcy advice counsellor, is here to help you make an informed decision regarding which debt relief solution is better for you. We have touched on some of the most important aspects of the two with the following:

What’s the Level of Debt in a Debt Agreement?

Part 9 Debt Agreement: Only unsecured debts can be included in a debt agreement. The combined value of these debts cannot surpass the threshold amount stipulated by the Australian Financial Security Authority (AFSA). For details on debt agreements.

Bankruptcy: There is no restriction on the amount of debt you owe in order to make a bankruptcy declaration. You could owe $100 or $100,000 or $1,000,000. This is because the act of declaring bankruptcy is officially declaring to creditors that you don\’t have the funds or asset value to cover the owed debt. Therefore, a trustee will sell your assets that are not protected. See here for details on your assets that are protected. If you are a high-income earner you may have to pay a small percentage of your income to your bankrupt estate.

What’s Your Earning Potential In A Debt Agreement?

Part 9 Debt Agreement: Whilst there are restrictions on the amount you can earn you have to be earning enough money to cover your Part 9 Debt Agreement repayments. This typically means that people with insufficient or unreliable income cannot enter into a debt agreement.

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