Life After Part 9 Debt Agreements

Part 9 Debt Agreements can provide relief from financial difficulties and debt and an alternative to bankruptcy. After that, life can be full of uncertainty and surprise events can cause problems with debt.

One option to fix debt problems could be insolvency. For instance, two forms of insolvency include part iv debt agreements and part x insolvency agreements. However, Part 9 and Part 10 differ in the level of bankruptcy. In other words, the policies and threshold will highlight which insolvency is most suitable. 

What is the difference between and part 9 and 10?

Part 10 insolvency agreements are intended for when you are unable to make payments toward the debt. Furthermore, you don't meet the financial thresholds for a debt agreement. In particular, debt agreements are where you can meet the income and other limits, and can make payments. 

Part 10's offer limited refinance options; as assets are usually sold as part of Part 10 to pay creditors. In brief, we will be providing information on debt agreements and the finance options available for you.

However, see our related article on part 10 insolvency 

Information about finance and entering into part 9 debt agreements

If you are reading this page, you may be in one of two situations. 

  • First of all, you are searching for finance options, and you are currently in debt agreement.
  • Finally, Seeking information about entering a debt agreement.

Click on the most relevant button below for further information.

 
Go to top

Go to Top

 

 

Currently in an insolvency agreement and seeking finance?

Most people in insolvency find relief in their debt agreement. Generally, the most challenging time was managing the debt before Part 9. However, now that time has passed, you are seeking finance options to better your situation. therefore, you are in a debt agreement and looking for information on:

  1. First of all, refinance your home & combine your debt agreement.
  2. Secondly, you have an interest in buying a house; or property for investment. 
  3. Additionally, obtain finance to purchase a new car.
  4. Finally, combine your debt agreement with a personal loan.

Debt Consolidation - consolidate my Part 9 Debt Agreement with my home loan. 

Debt consolidation finance using property security gives the lender with the lowest risk. Specifically, lower risk provides options for more competitive interest rates.  Nevertheless, lenders’ assess risk in different ways. Additionally, problems such as insolvency are risk factors a lender will seek to minimise. 

Small issues in the assessment can result in higher interest rates, lower loan amounts and higher insurance fees.  For example, see below a payment analysis of a DA consolidation:

Example of Debt Agreement Consolidation

DescriptionAmountsPayment
Property Value$660,000 
Home Loan$370,000$1500 per month
Debt Agreement $55,000$1300 per month
Total $425,000$2800 per month
Lender Fees Including Insurance & Other Fees$8000 
Total  New Loan$433,000 
LVR65% 
New Interest Rate 4.26 
New Loan Repayment$433,000$2125 per month
Savings $675 per month

Further benefits of consolidating an insolvency agreement

In most cases, other consolidation factors and benefits can outweigh the costs. However, combining an insolvency agreement into your home loan can offer the following benefits:

  1. Firstly, reducing your total payments; as per the above example.
  2. Secondly, ending your insolvency ahead of time allows cheaper property lending options earlier.
  3. Finally, updates your credit file as discharged.

Lending Policies for refinancing a debt agreement

People often believe specialist loans don't have credit criteria because they can help with credit issues. Even though, debt consolidation is available to refinance your part ix debt agreement standard lending policies do apply.  

  1.   Regardless, you need sufficient income available to meet the loan repayments.
  2.   Also, you will need sufficient equity to consolidate into your home loan.
  3.   Overall, there is also other lending criteria such as living expenses; and age of the agreement.

Property Equity & refinancing vs debt agreements

Obtaining a part 9 debt agreement requires meeting equity thresh-holds. However, obtaining finance requires 10-15% equity. Therefore, refinancing shortly after securing an insolvency agreement may not be possible because of low property equity.

In other words, allowing 1-2 years or longer for improvements in your property value may be required.  Hence, each property location improves in value at different rates. Consequently, within a short period, your equity may increase enough to refinance. 

The first step is to discuss with Loan Saver Network. As our process is different to other lenders; as we source funds through multiple channels. In addition, we understand debt problems and the finance options that may improve your financial situation. In addition, we provide advice on how to get yourself credit ready. 

Loan Saver Network offer our advice free of charge. To begin with, call us today on 1300 796 850 for a confidential discussion and finance strategy plan.

Debt agreement termination.

Applying for a Debt agreement is determined as an act of bankruptcy. Therefore, if your debt agreement is terminated, you can then apply to be made bankrupt. As a result, bankruptcy may result in:

  • Certainly, the sale of your assets to pay back your debts. 
  • Also, any waived interest payments will be re-instated. Hence, you would be required to repay your debts in full; including interest.
  • Finally, high-risk pricing would be applied, resulting in higher interest rates. 

For advice about your Part 9 Debt Agreement call Loan Saver Network today on 1300 796 850.  

Getting a Home Loan With a Part 9 Debt Agreement 

Owning your own home is a goal for most people in Australia. Obviously, a Part 9 Debt Agreement does cause issues with regard to obtaining finance to buy a home. In general, most people feel they can maintain debt agreement + home loan payments. Although, a question always asked is "how can I buy a house after a bankruptcy?" 

Many lenders now offer finance options for people with debt agreements. However, even though legislation support that you can obtain finance.  In brief, lenders want the debt agreement to be discharged before the loan or as part of the loan settlement.

We have previously provided funds for property purchases for people in DA. Important to realise is that in most cases, the government and lender purchase costs are higher than the clients' available funds. See below an example of a property purchase in Victoria. 

Please note that all states in Australia have different Government Stamp duty costs. Most important is that stamp duty rates differ between first home buyers and if you have owned property previously.

See related stamp duty links and information on the Money Smart website.

Example of property purchase costs

DescriptionFirst Home BuyerPrevious Property Owner
Property Value$550,000$550,000
Stamp Duty$0$24,970
Transfer Fees$1501$1501
Total Purchase Cost$551,501$576,471
Purchase with an 85% Loan  
Loan Deposit$82,500$82,500
Loan Amount$467,500$467,500
Risk/ Mortgage Insurance + other estimated fees$9983$9983
Total Funds Required to Purchase at 85% LVR$93,984$118,954
Purchase with a 90% Loan  
Loan Deposit$55,000$55,000
Loan Amount$495,000$495,000
Risk/ Mortgage Insurance + other estimated fees$11,427$11,427
Total Funds Required to Purchase at 90% LVR$67,928$92,898

As you can see; entry costs when buying a home are quite high. As a result, we find most clients need to postpone a purchase until sufficient funds are saved. Hence, in most cases, clients work to pay the debt agreement, plus save money for when the DA is completed.

As such, when the DA has come off your credit file; you would be suitable for traditional lending. Consequently, making available better pricing and lower fees. Therefore, reducing the cost to purchase a property.

Lender policies specific to Part 9 Debt Agreements

There are many lender policies when a lender assesses a loan application. Specifically, they all fit within the five core principles of lending called the 5c’s of credit.

5 C's of Credit

  1. First C being "character" and is sometimes referred to as credit file. Consequently, this 1st C category is the policies that concern specifically part 9 debt agreements.
  2. Additionally, the second C being "capital". As such, it refers to the amount of equity or funds a borrower puts toward an investment.
  3. Then the 3rd C being "capacity" and measures the applicant's ability to repay a loan.
  4. 4th C is "collateral" and relates to security and how fast it will sell. 
  5. In conclusion, 5th C being conditions.  As suchthis relates to the overall conditions of the loan. Hence, the interest rate, principal and the lenders desire to finance the borrower. Consequently, this also includes economic matters such as the recent royal commission and how it affected lending.

The first C being character relates to lending policies in regard to insolvency. 

Age of Part 9 debt agreement on your credit file

The number of years from the date of an insolvency agreement is a lender risk factor. In brief, the more recent the debt agreement, the higher the pricing and fees. In general, recently established debt agreements have low property equity. As a result of meeting the equity threshold requirement for Debt agreement approval.  

  •  One-day-old insolvency agreements can gain finance approvals. However, price grading and equity constraints are usually difficult limitations.
  • However, insolvency agreements one year to two years old have better refinance options. Consequently, the properties can have sufficient growth in equity. Therefore, we have refinanced many insolvency agreements in this age bracket and provided benefits.
  • Finally, insolvency agreement's older than two years can obtain finance with the lowest interest rates.

Each lender has a different point of view regarding debt agreements. As such, lenders can grade a part 9 as a bankruptcy. However, other lenders may see a part 9 debt agreement consolidation similar to a credit card consolidation. Consequently, different points of view can provide improvements or increases in interest rates and fees.

 

Seeking information about entering an agreement?

What is a Part 9 debt agreement?

Part IX refers to part 9 under the bankruptcy act of 1966. Consequently, a debt agreement is a binding agreement between yourself and your creditors. Hence, the agreement is to repay the unsecured debts & avoid the need for full bankruptcy. Furthermore, debt agreements are intended for:

  • Firstly, low-income earners or fit within the income threshold.
  • Secondly, they are also struggling to pay their debts and fit within the debt threshold.
  • Finally, individuals committed to paying back their debt; therefore don’t want a full bankruptcy.

Debt agreements are a serious step to resolve your debt and should not be considered lightly. In particular, you should obtain independent advice regarding debt agreements. With this in mind, you can make contact with a financial counsellor or legal service to obtain advice. What's more, see below links to the Money Smart Government website for information.

Financial Counselling

Free Legal Advice

The government has strict policies and thresholds with regard to debt agreements. Hence, there are thresholds for:

  • Firstly, your individual income.
  • Then, the debt amount included under the agreement.
  • Thirdly, the assessed net property equity.
  • Certainly, there are many other policies related to your debt agreement proposals.

Loan Saver Network highly recommends speaking to a financial counsellor if you are considering a part IX debt agreement.

Is a Part IX Debt Agreement right for you?

A debt agreement can avoid the full effects of bankruptcy. Nevertheless, entering into a  Debt Agreements has serious consequences as with any insolvency. 

Basic Part 9 Debt Agreement benefits

  1. For the most part, an insolvency agreement can assist you in gaining control of your debts.
  2. Certainly, harassing phone calls will stop; as the debt agreement administrator manages your debts. 
  3. Furthermore, you will repay what you can afford based on a budget you submit for assessment.
  4. Subsequently, will have a negative effect on your credit file and credit score.
  5. Regardless, you may not be able to obtain future credit for up to 7 years.

Is a Part IX debt agreement suitable for you? 

  1. Firstly, are you having issues making your loan repayments on time?
  2. Secondly, you haven't been in bankruptcy in the previous ten years? 
  3. Thirdly, you have unsecured debts below the set amount of $116,662 (as of 29th Jan 2020).
  4. Finally, your after-tax income is less than the threshold amount of $87,496.50 (as of 29th Jan 2020).

If you answered yes to these questions, then a debt agreement may be suitable for you. However, further information on part 9 debt agreement thresholds can be obtained from the money smart website & AFSA directly.

Part 9 debt agreement pros and cons

Debt Agreement Pro’s

  • Certainly, debt agreements are an alternative to full bankruptcy.
  • Above all, interest on your unsecured debts are frozen. As a matter of fact, only the principal plus establishment fees are paid.
  • In addition, your creditors cannot pursue you legally for recovery of the money owed.
  • Above all, you can apply for multiple household debt agreements to reduce the overall household debt.
  • Finally, if you have property equity within the equity threshold, you can retain your property.

Debt Agreement Cons

  • Firstly, they will affect your ability to get credit.
  • Above all, secured assets are not included under a debt agreement. Therefore you are still obligated to make those payments. As such, if you cannot make the payments, the lender can repossess your assets. 
  • However, if you run a business, you need to inform your clients that you are under a part 9 debt agreement.
  • Keep in mind; some employment industries restrict employment for people under debt agreements.
  • Finally, if you are unable to keep the payments on a Part IX debt agreement, you may be made bankrupt. Since simply applying for a debt agreement is an act of bankruptcy. As such, your creditors can apply to make you bankrupt.

What debts can be included under a Debt Agreement?

Most personal unsecured debts can be included under a debt agreement. Therefore, debts such as:

  • Personal loans, credit cards and store cards.
  • Additionally, payday loans and loans <$2000 can be included. As such, these loans typically are loans repaid within one year or less.
  • Plus, overdrawn bank accounts and unsecured overdrafts.
  • Likewise, unpaid rent can be included as a creditor to be put under a debt agreement.
  • Significantly, medical, accounting and legal fees as debt issues can result from these matters.
  • Finally, Phone, internet, gas and electricity bills can also be included in a debt agreement.

Debts that may not be included under a debt agreement.

There is a range of debts that can’t be included under a part ix debt agreement. Specifically, confirm with your creditor if insolvency can be used to settle your debts. However, some of these debts are:

  • Firstly, any secured loans cannot be included under a debt agreement. As such, these may include car loans, home loans, and any caveat debt.
  • As well as fines, penalties and court-ordered payments cannot be included.
  • Certainly, child support cannot be included and will still be owed.
  • Also, study loans such as HECS or HELP Loans and a debt is owed to the government.
  • Additionally, victims of crime debt & money owed as a result of a crime.
  • Likewise, debts incurred by fraud are not required to be included.
  • Finally, debts incurred after Australian financial security authority accept your proposal.

Related pages: Money Smart Website: What debts does a debt agreement cover?

What is a Debt Agreement Administrator?

Debt Agreement Administrators are professional debt negotiators who will negotiate with creditors. Consequently, they will also work with you to obtain a budget and manage your debt agreement.

Simply applying for a Debt Agreement is an act of bankruptcy. Hence, it is important to obtain advice to ensure a debt agreement is the most suitable solution. Further-more, debt agreement administrators are professional debt negotiators.  Similarly, they can advise of the potential for your debt agreement proposal being accepted by your creditors.

Important to realise,  is that DA administrators charge fees, and in some instances, they can be quite high. By and large, most fees are added into the DA. However, obtain fee quotes if you are considering a part 9 debt agreement

Is Your Debt Consolidation Loan Really a Bankruptcy?

A debt agreement is not a debt consolidation loan. Furthermore, Part 9 refers to the Part 9 clause under the bankruptcy act of 1966. As such, it is registered on the national personal insolvency index (n.p.i.i) as a form of bankruptcy. Therefore, if you are under an insolvency agreement, it will appear on your credit file under bankruptcy. 

Keep in mind; a part ix debt agreement is not debt consolidation or full bankruptcy. However, simply applying for a part ix debt agreement is an act of bankruptcy. As such, if your debt agreement is rejected, you may apply to become bankrupt. 

Debt consolidation mortgage or loan is where you obtain finance to combine your debts into a single loan payment.

Recorded information about your insolvency.

Information about your insolvency is kept on a number of databases. Importantly, these databases can be accessed by various parties.

  • Firstly, all forms of bankruptcy are recorded on your credit file with credit reporting agencies.
  • However, all forms of bankruptcy are also held with the National Personal Insolvency Index (NPII). Although, recorded information on the NPII  is held longer than on your credit file.
  • Finally, lenders will look at your credit file when you apply for credit. As such, Part 9 may prevent you from getting further finance. Although, not all lenders check for long term insolvencies.

Applying for a Part 9 Debt Agreement is an act of bankruptcy. Another key point is if your creditors reject your agreement, you can apply to the court to make you bankrupt.

Some of the various related debt solutions

  • Firstly, part 9 debt agreements are suitable if you are on a low income; and fit within the DA thresholds.
  • Secondly, full bankruptcy is most suitable when there is no income, or limited assets that a trustee can sell.
  • Thirdly, home loan debt consolidation can be suitable with sufficient equity and income.
  • Also, unsecured personal loan debt consolidation usually has minimal benefits. As the loans are unsecured, the lender policies are very strict. Plus, can result in small loan amounts & high-interest rates.
  • Finally, informal payment agreements are usually established to reduce payments. However, payment terms can be quite long, and you may find you have the same amount of debt after many years.

Let's talk about a solution that suits you