Help! Debt Agreement or Bankruptcy? What’s the diff? - Part II

When Aussies experience severe debt problems and are unable to repay their debts, they are confronted by many options they may never have heard of before. Terms like; debt agreement, insolvency agreement, Part 9, part 10 and bankruptcy. Even if you have heard of these terms do you really understand what they mean? Well, here goes a very basic explanation of the different options available to Aussies who have creditors on their back demanding payments, but no longer can afford to repay them. 


Bankruptcy is a legal process that releases a person from almost all of their debts. Although you no longer are required to pay back your debts there are major consequences of declaring bankruptcy that include:

  • Bankruptcy restricts you from leaving Australia without written permission from your trustee even if it is for a holiday and you may have to give up your passport.Your name will be placed on a credit reference for 7 years even if your bankruptcy has been discharged.
  • Your pay may be garnisheed.
  • Your non-exempt assets (including your house, shares, land and investments) belong to your trustee and can be sold at any time without your permission.
  • You are only allowed to keep a limited amount of belongings and any non-exempt assets you receive during your bankruptcy become the property of the trustee.
  • Your job opportunities may be affected, especially with jobs handling money or where a license is required (e.g. security industry, real estate, licensed builder etc). You cannot be the director of a company or hold certain public positions without permission.
  • If you trade under a business name other then your own, you may have to tell everyone you deal with that you are an undischarged bankrupt. You may also loose the right to take and/or continue most legal actions.

An important fact to remember is that whether you must opt for a debt agreement or bankruptcy, they are both part of the Bankruptcy Act (legislation) so effectively both options will impact on your credit file and ability to obtain credit. If you ever do end up with a severe debt problem, and we certainly hope you don’t, our message to you is to make sure you fully understand the implications of each and every option you have available before you proceed, and seek as much professional guidance as possible.

Related Articles

"Although I had fallen in hard times in the past, they were willing to look past that & give me a Fair Go. Friendly service & nice people to talk to. Thanks guys and girls!"

Daniel, February 2016