What Is a Debt Agreement in Australia and Should You Consider One?

What Is a Debt Agreement in Australia and Should You Consider One?

If you're drowning in debt, a debt agreement might sound like a lifeline. But is it the right move in 2025? Let’s break it down.

What Is a Debt Agreement?

A debt agreement is a legally binding arrangement between you and your creditors to repay a percentage of your debt over time — typically 3 to 5 years.

Who Can Apply?

  • Over 18 and insolvent (can’t pay debts when due)
  • Unsecured debts under $120,000 (as of 2025)
  • Assets and income under threshold set by AFSA

Pros

  • Stop interest and legal action
  • Consolidate into one regular payment
  • Option to avoid full bankruptcy

Cons

  • Serious impact on credit score (stays for 5–7 years)
  • Can affect rental or job applications
  • Not suitable for secured debts (e.g., mortgages)

Important Notes

  • You must use a registered debt agreement administrator
  • It’s listed on the National Personal Insolvency Index (NPII)
  • Missing payments can lead to termination

Final Tip: Always get advice from a licensed financial counsellor before entering any agreement.

Disclaimer: This article provides general information only. Seek personalised advice from a licensed professional or AFSA-approved counsellor.

Debt agreement consultation in Australia 2025

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