What Is a Debt Agreement? An Australian Guide to Your Options

If you're falling behind on repayments, a Part IX Debt Agreement can stop interest on most unsecured debts and replace them with one affordable payment. But you must fit strict eligibility caps and accept real consequences for your credit file and public record.

The figures below use the Australian Financial Security Authority's, or AFSA's, indexed amounts updated on 29 April 2026. That lets you check the current caps, costs, timelines, and alternatives.

Key Takeaways

A Debt Agreement eases pressure, but only if you fit the caps and can finish the plan.

• A Debt Agreement is not bankruptcy. It's a formal Part IX process. If creditors owed most of the money vote yes, it binds eligible unsecured creditors and interest stops.
• 2026 eligibility caps are strict. Unsecured debts must not exceed $150,950.80, divisible property $301,901.60, and after-tax income $113,213.10. AFSA indexes these amounts twice a year.
• Costs matter. Expect a $200 AFSA lodgement fee, a 20% administrator fee on the proposal value, and a 7% realisations charge on money received.
• Your credit file is affected. The listing stays for five years from the start date, and the public insolvency record can last longer.
• Most agreements run for up to three years. Five years is allowed only in limited cases, such as when you have an interest in a home.
• Not all debts are covered. Court fines and child support survive. Secured creditors can still repossess if you miss those repayments.
  
  

What Exactly Is a Debt Agreement (Part IX)?

A Debt Agreement settles unsecured debts for an amount you can afford.

Because the formal terms in Part IX can feel dense at first, some readers prefer a plain-English overview that sets out how the process works, what creditors vote on, how payments are managed, and why it differs from bankruptcy before they move on to the caps and practical consequences explained below, so what is debt agreement can be useful background reading.

AFSA runs the creditor vote. If creditors owed most of the money agree, the plan becomes binding. Interest stops on covered debts, and you pay through a registered administrator.

A Debt Agreement Administrator prepares and manages the proposal. A provable debt is one that can be included. Divisible property means assets available to creditors in bankruptcy. Your details also appear on the National Personal Insolvency Index, or NPII, a public register.

One detail people miss is that creditor acceptance counts as an act of bankruptcy under section 40(1)(hb) of the Bankruptcy Act 1966. Part IX is still not bankruptcy, but this can matter if the agreement later fails and a creditor goes to court.

Are You Eligible? 2026 Thresholds and One Rule People Miss

Eligibility is strict, and AFSA cannot waive the caps.

You cannot propose a Debt Agreement if you have been bankrupt, had a Debt Agreement, or entered a Personal Insolvency Agreement in the last ten years. You must also stay under three indexed limits when you lodge.

These amounts are indexed every 20 March and 20 September. Check AFSA again before you lodge, especially if you are close to a cap.

How a Debt Agreement Works (Start to Finish)

Approval is not automatic, and it usually takes six to eight weeks.

Nothing is final until creditors approve the proposal by dollar value.

• Step 1: Get free, independent advice first. Call the National Debt Helpline, 1800 007 007, before you sign with a commercial firm.
• Step 2: Choose a registered administrator to prepare the proposal. You pay the $200 AFSA lodgement fee.
• Step 3: AFSA opens voting for 35 days, or 42 in December. A majority by dollar value binds all eligible unsecured creditors.
• Step 4: If accepted, you make scheduled payments and interest stops on included unsecured debts.
• Step 5: If rejected, creditors can resume recovery and may petition for bankruptcy.
• Step 6: Complete the payments to be released from covered debts. If income falls, a variation may extend the term.
  
  

3 Benefits and 3 Trade-Offs Australians Should Weigh

The relief is real, but the trade-offs are too.

Benefit 1: Once the agreement starts, included unsecured creditors cannot add interest or chase the debt.

Benefit 2: You make one regular payment through the administrator, which makes budgeting simpler.

Benefit 3: Finish the plan and you are released from covered unsecured debts.

Trade-Off 1: Your credit file shows the agreement for five years from the start date, and the public NPII record can last longer.

Trade-Off 2: The $200 AFSA fee, the 20% administrator fee, and the 7% realisations charge can absorb a large share of what you pay.

Trade-Off 3: If you fall six months behind, the agreement can end. Creditors can restart recovery and may pursue bankruptcy. You must also disclose your status before taking credit above $7,412.

Alternatives When a Debt Agreement Is Not the Best Fit

A Debt Agreement is only one option, and sometimes another path is safer.

Temporary Debt Protection: This gives you 21 days of protection from unsecured enforcement while you get advice and choose a path.

Bankruptcy: This usually lasts three years and one day and has no eligibility caps, but asset and work impacts are heavier.

Personal Insolvency Agreement (Part X): This has no thresholds and can suit higher-value matters, but it is usually more complex and expensive than Part IX.

Informal Hardship Plans: These may work if the problem is short term. A free financial counsellor or the National Debt Helpline is a strong first stop.

Make a Debt Agreement Work for You, Not Against You

The plan only helps if your budget can carry it.

Stress-test your budget at current prices before you sign. A modest buffer can stop one surprise bill from turning into arrears.

Set reminders for each repayment and review your income every few months. If circumstances change, ask about a variation early instead of waiting until you are behind.

While you are in a Debt Agreement, you are insolvent under administration under the Corporations Act. That can affect directorships and some licences, so check the rules before accepting a role.

Keep your AFSA reference number, administrator letters, and payment receipts. When the agreement ends, confirm the dates on your credit file and NPII record are correct.

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