If I have bad credit, can I still qualify for a debt agreement?
In order to file for a debt agreement an individual must currently be insolvent on their debts. This means that an individual is not currently paying on their debts. Because of this, those who enter into debt agreements are more than likely to already have some sort of bad credit. In Australia, only negative credit events are reported to credit reporting agencies, therefore previous late payments, unmade payments, and incomplete payments will be reported and will negatively affect one’s credit score.
There are other standards in which a person must meet in order to enter into a debt agreement. They must, as stated before, be currently insolvent, late, and not paying on their current debts. They must not have filed or even attempted to file bankruptcy within the past ten years. This means they cannot even have entered into Part X of the Bankruptcy Act within the past ten years. An individual’s unsecured debt to file a Part X must be less than $82,500.60 and the individual’s taxable income must be less than $61,875.45.
Assets also cannot exceed $82,500.60. However, when filing a Part IX Agreement, income cannot exceed $54,286.05 and debt cannot exceed $72,381.40. The same applies to assets. They cannot exceed $72,381.40.
An individual must remember that once they enter into a debt agreement, the debt agreement and terms will be reported to credit agencies and will likely have a negative effect on one’s credit score. The debt agreement will remain on the credit report for seven years and will make it difficult for an individual to obtain new credit or be issued further credit from existing creditors. It is also important to remember that entering into a debt agreement is a step in the right direction and will inevitably aid in repairing one’s credit.
Unlike bankruptcy, the debt agreement allows for the debtor to pay back all or a portion of their debt under their payment agreements and will allow the debtor to work on repairing their credit and allow the creditors to recoup some of the debt owed to them. In bankruptcy, the creditors may find that they cannot recover any of the money that they are owed. That is why many find that it is in their best interest to accept the Part X or Part IX proposal and take a possible partial loss instead of losing it all.
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