Frequently Asked Questions

Looking for answers? This might be the place to find them. Take a look below and if you don’t see your question answered already, you can contact us directly.

How does a Debt Agreement work?

A Debt Agreement is a Government legislated formal agreement between a person who cannot meet their payments and the people they owe money to in unsecured loans. It is an alternative to bankruptcy and has less severe consequences.

Debt Agreements are flexible and can include:

  • a compromise agreement to repay less than the full amount of your debts
  • regular payments from your future income which you can afford
  • a lump sum payment
  • a temporary suspension of your debt repayments
  • the transfer of some of your property to those you owe money to

From the day you lodge your Debt Agreement, debt collection and legal action must stop (and later too if it is accepted). In addition all interest, account fees and late payment fees are frozen. For this reason it is important you get your application finalised ASAP.

Once you make all your payments and finalise your Debt Agreement, those debts included in the agreement are gone.

How much will I repay in a Debt Agreement?

You generally repay a regular amount you can afford which is collected through weekly, fortnightly or monthly direct debits to a Registered Debt Agreement Administrator. The  Administrator keeps records and makes quarterly payments to your creditors until the Debt Agreement is finalised.

You may well repay less than 100% of the total amount you owe and pay no more interest. For example: You owe $30,000 on credit cards which are unmanageable and submit a Debt Agreement to repay $600 per month for 4 years. In total you would pay $28,800 or only 96% of your debt. Persisting with the debt at 18% interest, it would take you almost 8 years to repay it at $600 a month and in total you would repay $55,866. In all you would save $27,066 in this example.

Is a Debt Agreement automatically approved?

No. There are various hurdles to cross to have your Debt Agreement approved.

These requirements include:

  • proof you are insolvent (unable to pay your bills or repayments when they fall due)
  • not having lodged any kind of bankruptcy or debt agreement in the past 10 years
  • your complete financial situation, i.e. assets, debts, income, expenses & budget
  • your reason for getting into difficulty
  • Income below the threshold – see our Debt Agreements webpage
  • Debts (and divisible assets) below the threshold – see our Debt Agreement webpage
  • An acknowledgement from your Debt Agreement Administrator that they believe:
    • the information in the Debt Agreement to be correct
    • that you can meet your obligations to make repayments on time
    • you have read the Prescribed Information (so you are aware of the consequences)
  • Approval by AFSA (The Official Receiver)
  • Payment of the lodgment fee
  • Approval by more than 50% of your creditors (in dollar value of the total included)

SOS Debt Solutions manages all these steps for you.

Can I make changes to a Debt Agreement after it starts?

Yes. If your circumstances change you can vary your Debt Agreement in the future through your Debt Agreement Administrator. You can increase or decrease your payments (with a good reason) or even pay the entire amount off early if you come into a lump sum of money. Any change has to be approved by your creditors. SOS Debt Solutions can provide the expert advice you need to put forward your changes in the most reasonable and positive light.

Can I pay off my Debt Agreement sooner?

Yes. You can pay it off at any time if you happen to get access to money. There is no difference to the total amount you must repay. The finalisation of your Debt Agreement will be recorded on your credit history meaning your credit history will be cleared sooner. All records remain on your credit history for 7 years.

How long does it take to set up a Debt Agreement?

This most often depends on how long it takes the debtor (you) to get all their information together and pay the Lodgment and Assessment fee. Once the Debt Agreement is ready it must be lodged with the Official Receiver (AFSA) within 14 days of you signing it. They assess it and if it is all correct and approved they send it to your creditors with a Statement of Claim and Voting (SOCAV) page. They have 35 business days to return their vote (or 42 working days if over Christmas). In all, you can expect to start your repayments around 11 weeks after submitting the completed Debt Agreement Proposal.

Can we have a joint Formal Debt Agreement?

No. Formal Debt Agreements involve one person who owes money. If you hold a joint debt with a partner or friend and you enter a Formal Debt Agreement then the person or company you owe money to can pursue your partner or friend for 100% of the debt. It is therefore normal for both of you to enter Debt Agreements simultaneously with a provision that both must be considered at the same time by the creditors.

What is the National Personal Insolvency Index or NPII?

This is a permanent and public record of all personal insolvency proceedings in Australia since 1928. It is maintained by AFSA and can be searched by anyone through a fee-based index search agent (CITEC Confirm, Veda or SAI Global). All Debt Agreements are listed on the NPII.

Can I include my mortgage in a Debt Agreement?

No. All secured loans must be disclosed but cannot be included in a formal Debt Agreement. Most often, car and home loans are secured by an asset i.e. the car or the house. You must still pay secured debts or risk repossession or foreclosure of the security asset. You might be able to negotiate an informal agreement with these lenders. We can assist with this process.

How do I negotiate reduced mortgage payments?

You would need to negotiate directly with your lender to temporarily stop or reduce your repayments. This is called an Informal Debt Agreement. Most banks have a requirement to consider your application under financial hardship provisions although they most often refuse them. A compelling and well-presented application is your best approach as you only get one chance to put your case. SOS Debt Solutions can help you prepare an Informal Debt Agreement if this is appropriate for your circumstances. If you feel you have been unjustly refused then you can apply to the External Complaints Service which all lenders must subscribe to.

What is a Debtor?

This is the person or organisation who owes money to another, e.g. the borrower.

What is a Creditor?

This is the person or organisation who is owed money, e.g. the bank or lender.

What is AFSA?

This is the Australian Financial Security Authority which is the Government agency responsible for registering and checking to ensure your Debt Agreement meets all the requirements. AFSA was know at the Insolvency & Trustee Service of Australia (ITSA) before 15 August 2013.

What happens if my Debt Agreement is not approved by my creditors?

If you don’t get over 50% of “Yes” votes (in dollar value) from your creditors then your Debt Agreement will be defeated and cancelled. Your creditors and debt collectors can then pursue you as they see fit. Lodging a Formal Debt Agreement is considered an act of bankruptcy and can allow your creditors to commence bankruptcy proceedings against you if the Debt Agreement is not approved.

If my Debt Agreement is approved, are Creditors who abstained or voted “No” still included?

Yes. All creditors in the Debt Agreement are included in the result whether they voted “Yes”, “No” or abstained.

Which debts must I disclose in my Debt Agreement?

All your debts have to be disclosed in your Debt Agreement even though some may be excluded. Non disclosure is treated very seriously by AFSA who will cancel your Debt Agreement if they find out you have not been truthful. The penalty for a false declaration is one year imprisonment. It is essential you are totally open and honest with your SOS Debt Solutions adviser to ensue you get the best possible result.

What debts must be excluded from a Formal Debt Agreement?

The following cannot be included in a Debt Agreement:

Secured loans e.g. Home loans or car loans

HELP, HECS & SFSS debts (e.g. Higher Education Loan Program)

Debts incurred through fraud

Fines, penalties and court ordered payments e.g. SPER

Debts under a maintenance agreement (overdue child support)

Note: Child support debts can be included in a Debt Agreement and receive regular payments but when the Debt Agreement is finalised, the rest of the child support debt is still payable.

What debts can normally be included in a Formal Debt Agreement?

The loans must be unsecured to be included. This means there is no asset like a car , equipment or property which can be repossessed if you don’t pay.

Common examples are: Credit cards, personal loans, store cards, tax debts & family loans.

How does an Informal Debt Agreement compare to a Formal Debt Agreement?

The informal agreement has no lodgment costs but you would still pay for professional assistance to prepare and present it. It does not automatically affect your credit history but if you already have defaults then your history has these recorded already anyway. There is nothing to say a creditor will agree to an informal agreement and generally they are quite time consuming and unsuccessful. They most often only apply for 3, 6 or 12 months and are generally for a temporary situation such as illness or injury causing temporary loss of income There is some doubt as to whether an informal agreement is enforceable if the lender changes their mind at any point. Any creditor who declines to agree to it can still pursue you for your debts.

How does bankruptcy compare to a Formal Debt Agreement?

Bankruptcy will wipe your financial plate clean. Once you have declared Bankruptcy, you no longer need to honour the financial commitment you made to your creditors. You don’t have to make any further repayments, pay any interest or fees. You do however, have to live in a state of Bankruptcy for the following 3 years. Bankruptcy comes with a range of regulations and restrictions which can effect your income, your employment, your Assets and travelling overseas. A Bankruptcy will be listed on your credit file for 3 years. It will also be noted that you are a discharged bankrupt for the following 2 years. It will be difficult to obtain new credit during this period. The restrictions placed on you during bankruptcy make Bankruptcy a last resort for Australians in financial hardship.

A Formal Debt Agreement will renegotiate your financial commitments so you can still repay your debts, but in an affordable way. In a Part 9 Debt agreement, you are still honoring your creditors and repaying your debts, but it is a reduced, affordable amount. Because you are still repaying your debt, you don’t have the harsh restrictions and regulations of Bankruptcy. A Formal Debt Agreement lasts for 5 years.

What is a Part IX or Part 9 Debt Agreement?

Part 9 refers to the section of the Bankruptcy Act which legislates Formal Debt Agreements so a Part IX Debt Agreement is exactly the same as a Formal Debt Agreement or a Government Legislated Debt Agreement.

What are the consequences of proposing and submitting a Debt Agreement?

Although a Debt Agreement is less serious than bankruptcy, there are still consequences and you should be aware of these before proceeding. The 3 attached files are Govt. information from AFSA describing the consequences. Please feel free to discuss anything you do not fully understand with your SOS adviser.

AFSA Consequences of a DA


Personal Insolvency Information for Debtors  See pages 4 & 5

Can I get a loan when I’m in a Debt Agreement?

If you apply for a loan or credit, a lease or hire purchase, open an account or even write a cheque (all above about $5,000), or carry on a business, you must disclose that you are in a Debt Agreement. As the Debt Agreement is recorded on your credit history, it is up to the bank or lender to make their own enquiries and decision as to whether they will loan you the money or not. In general it will be more difficult to get a loan and you will most likely need to go to a second tier lender who will charge a higher interest rate. It is best if you can get by without applying for a new loan whilst you are in the Debt Agreement.

Who can I talk to about which solution is best for me?

Here at SOS Debt Solutions, solving our clients’ financial issues is what we do day in and day out. We offer a free consultation to determine what is the best solution for you. We must then, of course, charge a fee for the specialist services we provide in ensuring whatever arrangement you decide on is prepared in the most professional manner possible. Feel free to contact us today and discuss your options.


This information is not legal or financial advice and should not be interpreted as such. These answers are provided for general information purposes only and as the facts and regulations change from time to time, you should always seek professional advice for your particular circumstances.