Sometimes it is preferable for debtor (and creditors) if a formal arrangement is entered into.

Lower income debtors without significant debts can propose a debt agreement to their creditor under Part IX of the Act. These agreements are only available where debts are less than $73,236 (indexed) and the debtor’s net income is less than $54,927.80 (indexed).

Such agreements are usually arranged and administered by debt agreement administrators. These administrators can charge considerable fees. Reports of some administrators inappropriately recommending debt agreements has led to the Government proposing some legislative changes. Debtors should be cautious, and should seek independent advice before entering into a debt agreement.

An application for a Part IX agreement will be entered onto the National Personal Insolvency Index, even if the agreement is not accepted by creditors. This information is added to the debtor’s credit report.

A debtor can also apply for a personal insolvency agreement under Part X of the Act. A range of agreements are possible, including assignment of a proportion of assets to the creditors or continuing to operate a business under supervision. These agreements require the involvement of a private trustee, and fees can be considerable. They are more suitable for debtors who are in business or who have assets or a business to protect.