The Law Handbook 2024

384 Section 5: Managing your money under a debt agreement than the initial debts they were struggling to pay. Other concerns with debt agreements include these: • A debt agreement may be detrimental to a debtor’s interests if other ways of settling a debt are not considered (e.g. negotiating informally with credi- tors, or applying to have the debt waived (given up) due to the creditor’s unconscionable conduct). • A debt agreement may involve unaffordable repayments. If the debt agreement terminates early due to arrears, creditors can recommence collecting the full debt and back-date interest. • The fees paid to the administrators of debt agreements is money that could have gone towards reducing debt. • Debt agreements can unfairly ensnare poorly informed debtors who do not understand the true cost and consequences of a debt agreement, or who do not know what other debt options are available, or who think the debt agreement is a debt consolidation loan. • A debt agreement may be of no practical benefit for a debtor as their credit report is still adversely affected and they still have to make payments from their income that they may not be able to afford. Complaints against debt agreement administrators An administrator’s registration can be cancelled if they are unable or fail to properly carry out their duties. If you have a concern about a debt agreement administrator, you can lodge a complaint with AFSA. Practice Step 1: Is the debtor eligible to enter into a debt agreement? A debtor is eligible to enter into a debt agreement if: • the debtor is insolvent (unable to pay debts as and when they fall due); • the debtor’s unsecured debts and equity in divisible property do not exceed $137  537 (as at October 2023) (s 185C(4)(b), (5) Bankruptcy Act); • the debtor’s divisible property – property that could be sold by the trustee if the debtor were bankrupt – does not exceed $275 075 (s 185C(4) (c),(5) Bankruptcy Act); • the debtor’s after-tax income in the 12 months after the beginning of the agreement is not likely to be more than $103 153 (as at October 2023) (s 185C(4)(d), (5) Bankrupty Act); or • the debtor in the past 10 years has not been a bankrupt, a party to a debt agreement or given a Part X authority (s 185C(4) Bankruptcy Act). Step 2: Appoint an administrator A debtor can either: • self-administer their debt agreement; or • appoint a debt agreement administrator, who is required to be registered with AFSA under the Bankruptcy Act. Step 3: Lodge the proposal with AFSA To commence a debt agreement, the debtor, or their agent, gives a debt agreement proposal, an explanatory statement and a statement of affairs to the Official Receiver (AFSA) within 14 days of the documents being signed. If it is proposed that an administrator is to administer the debt agreement, then they must certify that, among other things, they have reasonable grounds for believing: • that the debtor is likely to be able to meet their obligations under the proposal; and • that all the information required in the statement of affairs and explanatory statement has been set out. Step 4: The Official Receiver (AFSA) considers the debt agreement proposal The Official Receiver then assesses whether or not the proposal contains all the required information and whether or not the debtor is eligible to enter into a debt agreement. Step 5: The Official Receiver (AFSA) asks the creditors to respond to the proposal Once the Official Receiver (AFSA) is satisfied that the proposal complies with the Bankruptcy Act, it will write to the creditors and ask them to respond to the proposal (s 185EA Bankruptcy Act). If a majority of the creditors in value who reply to the proposal accept it, the proposal becomes binding on all creditors (s 185EC). If a creditor holds property as security, the value of their debt for the purpose of voting on the