Part IX Agreements, also known as Part 9 Debt Agreements, provide an avenue for a person who is unable to pay their debts to reach an agreement with their creditor(s) for repayment.

Part 9 Debt Agreement

A Part 9 Debt Agreement is a useful tool for debtors and creditors alike, providing debtors with a way in which to settle debts without becoming bankrupt, and creditors with the potential to receive more than they would if the debtor were to be made bankrupt.

What is a Part 9 Debt Agreement?

A Part 9 Agreement, otherwise known as a Debt Agreement, is a binding agreement between a debtor and their creditor(s) regarding payment of their debts. These agreements are legislated under Part IX of the Bankruptcy Act 1966 (Cth).

Such agreement may provide for only a portion of any debts to be paid back and the remainder forgiven, or for the full amount of the debt to be paid back under a payment plan. A Debt Agreement can provide for a payments to be made over a period of up to three years, or up to five years if the debtor owns their own home. The specific terms of the agreement will depend on what each party is willing and able to agree.

Once all payments under the Debt Agreement are made, a debtor is released from the remainder of their debts and creditors are unable to recover any further money from them.

Am I able to enter into a Debt Agreement?

Not everyone is eligible to enter into a Debt Agreement, and not all debts can be covered. Notably, the following persons cannot enter into a Debt Agreement:

Persons who have been bankrupt, had a Debt Agreement, or a Personal Insolvency Agreement in the last 10 years,
Persons who estimate that their income for the next 12 months, after tax, will be more than $86,800.35,
Persons with unsecured debts of more than $115,733.80,
Persons with unsecured assets of more than $231,467.00.

Though a Debt Agreement can be entered into for most debts, they cannot release a debtor from paying any of the following:

Court fines,
Student loans, such as any HECS, HELP, or SFSS debts,
Victims of Crime,
Debts incurred after the Australian Financial Security Authority (‘AFSA’) receives the debtor’s proposal,
Secured debts such as a mortgage(s) or car loan(s), or
Tax debts. These can be included in a Debt Agreement, but the Australian Tax Office is still able to keep tax refunds to cover any remaining debt.

Certain other debts may not be covered by the agreement. AFSA provides a helpful guide of other forms of debts which may be included.

Debts which are shared with another person may also be included in a Debt Agreement, however this does not release that person from paying their debt.

Where a person is not eligible to enter into a debt agreement, they may instead enter into a Part X Personal Insolvency Agreement. These agreements perform a similar function to debt agreements by providing an option for a debtor and their creditor(s) to create an agreement to arrange for payment of any debts. The main difference is that these agreements involve the appointment of a trustee who takes control of the debtor’s property.

What are the benefits and consequences of entering into a Debt Agreement?

Whether or not a Debt Agreement is appropriate will depend on the circumstances.

For debtors

For debtors, they provide a way for a person to repay their debts without becoming bankrupt. In brief, bankrupts are subject to certain prohibitions during the period of their bankruptcy that are not imposed on debtors who enter into Debt Agreements. For example, bankrupts are prohibited from:

travelling overseas without approval from the trustee,
acting in position of management in a company, or
trading without advising of their bankruptcy.

A notable consequence of entering into a Debt Agreement is that doing so is considered an act of bankruptcy. Accordingly, a debtor’s name will be placed on the National Personal Insolvency Index ('NPII') for a period of five years. The NPII is a public record of insolvency proceedings in Australia and therefore has the potential to affect future business opportunities. A listing on the NPII, however, is unlikely to affect you to the same extent that a bankruptcy would.

In addition, a Debt Agreement will be recorded in the Public Record of a debtor’s credit file for five years from the date the agreement is entered into. This period may be extended if there is a failure either to comply or to make payments in accordance with the agreement. As such, their credit score will be significantly reduced and it will most likely be difficult to obtain loans or other financial assistance while the agreement remains on a person’s record. However, where a person finds themselves unable to pay their debts such that a Debt Agreement is a possibility, their credit score and ability to obtain finance is likely to be adversely affected even without the presence of a Debt Agreement on their record.

For creditors

Where a debtor has failed to repay money and there is a possibility that they may be insolvent, a Debt Agreement is likely to provide an opportunity for the creditor to be repaid than if the debtor were to be made bankrupt. It can also provide security and protection for creditors whereas an informal repayment agreement cannot.

A debtor has three months to make up any arrears should they default on a Debt Agreement. After this period, the Debt Agreement Administrator must send a notice to the creditors advising them of the default and the creditors may then terminate the agreement.

Termination of the agreement reinstates all debts, including any interest and charges as if the Debt Agreement never occurred. Creditors may then take action against the debtor accordingly.

How can Sharrock Pitman Legal assist?

If you require advice on whether a Debt Agreement may be right for you, please feel free to contact our Litigation team on 1300 205 506. We have an Accredited Specialist in Commercial Law and a Commercial Litigation team who can provide you with advice regarding your options, in addition to guiding you through the steps that are appropriate in your circumstances.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

For further information contact

Caroline Callegari

Caroline Callegari is an Associate Principal and leads our Disputes & Litigation team. She has an advisory and advocacy practice in the following areas: Commercial Litigation, corporate and personal disputes, debt recovery and, insolvency and bankruptcy matters. Caroline can be contacted on (03) 8561 3324.

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Building and Construction Industry Security of Payment Act (Vic)

I owe someone money - how can I negotiate a settlement for a debt recovery matter?

Part IX Agreements, also known as Part 9 Debt Agreements, provide an avenue for a person who is unable to pay their debts to reach an agreement with their creditor(s) for repayment.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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Part 9 Debt Agreements

Part IX Agreements, also known as Part 9 Debt Agreements, provide an avenue for a person who is unable to pay their debts to reach an agreement with their creditor(s) for repayment.

Part 9 Debt Agreement

What is a Part 9 Debt Agreement?

Am I able to enter into a Debt Agreement?