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.

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Are you eligible to apply?


It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.