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

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

PART I – Debt Agreements

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.

Debt Agreements

Debt agreements are basically an arrangement between you and your creditors (those you owe money to) to pay back their money on a new, agreed, affordable payment plan. The plan combines all of your current unsecured debt, into just one regular payment without accruing interest as your debts become frozen. In Australia, you can enter into either an informal debt agreement or a formal debt agreement. The formal debt agreement can either be a part 9 (often written like “part IX”) or a part 10 (often written like “part X.”) So to recap, here are the different debt agreement options using their full name description.

  1. Informal or
  2. Formal: Two options;
  • Part 9 (IX) debt agreement or
  • Part 10(X) personal insolvency agreement

(Note, although the part 10(X) is a “debt agreement” it is properly referred to as part 10(X) personal insolvency agreement.)  The formal agreements are governed on a federal level and are legislated, whereas the informal agreement is purely a new contract between you and your creditors. The major difference between the formal and informal agreement is that with a formal agreement, because it has legislation, your credit history will be negatively affected and you will have your name entered into the National Personal Insolvency Index (NPII). The informal agreement does not have the two consequences to credit history reporting because the government does not regulate it. Be mindful, however, that informal agreements are only binding on those creditors who agree to them so if you do have other creditors, they can still continue to pursue you for the debt. If you do wish to enter into an informal or formal agreement, you should seek advice on your individual situation and can contact one of many Australian registered debt agreement administrators to help.  So, I hear you ask, is there a difference between a part 9(IX) debt agreement and part 10(X) personal insolvency agreement?  In very basic terms, it depends on your assets, liabilities, income and if you have had any prior acts of bankruptcy as to which agreement you can make.

To be eligible for a part 9 you must;

  • Not have been bankrupt or had a Debt Agreement in the last 10 years;
  • Have unsecured debts of less than $95,386.20, have divisible property valued at less than $95,386.20; and
  • Expect that your after-tax income for the next 12 months will be less than $71,539.65.

If you do not meet these guidelines, then you will have to enter a part 10 (which will cost you more to arrange.) Please note that these figures are updated twice yearly by ITSA (Insolvency and Trustee Service Australia.)  Regardless of which formal debt agreement you enter, both will mean the details of the debt agreement will be entered into NPII and recorded on your credit reference file for 7 years.

 Part 2: Bankruptcy

…Coming Soon

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Are you eligible to apply?

  • I am 18 years or older
  • I have not entered into bankruptcy or part 9 agreement within the last 12 months
  • I am willing to provide my Bank Statements online

Please note: Bank statements can only be submitted via our secure online service.


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.