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Consequences
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| Consequences of proposing a debt agreement |
- A debtor who proposes a debt agreement commits an act of bankruptcy. A creditor can use this to apply to court to make the debtor bankrupt if the proposal is not accepted by creditors.
- The debtor’s name and other details appear on the National Personal Insolvency Index (NPII), a public record, for the proposal and any debt agreement.
- The ability of the debtor to obtain further credit is affected. Details may also appear on a credit reporting organisation’s records for up to seven years.
- During the voting period creditors cannot take debt recovery action or enforce a remedy against the debtor or the debtor’s property; and must suspend deductions by garnishee on debtor’s income.
*Please see the current Indexed Amounts fact sheet.
| The consequences of a debt agreement |
- The debtor is not bankrupt.
- All unsecured creditors are bound by the debt agreement and are paid in proportion to their debts.
- The debtor is released from most unsecured debts when they complete all their obligations and payments.
- Secured creditors may seize and sell any assets (eg a house) which the debtor has offered as security for credit if the debtor is in default.
- Creditors cannot take any action against the debtor or property of the debtor to collect their debts.
- The agreement does not release another person from a debt jointly owed with the debtor.
- A debtor must disclose that s/he is a party to a debt agreement if incurring debt or obtaining goods and services in excess of the threshold
- If trading under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to all people dealing with the business
*Please see the current Indexed Amounts fact sheet.
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