Debt agreements

If you can’t meet your financial commitments but you don’t want to consider bankruptcy, then a debt agreement might be right for you.

A debt agreement allows you and your creditors to come to a compromise that allows you to repay less than the full amount for the debt.  The agreement is legally binding, meaning your creditors can’t change their minds.

All of your unsecured debts are included in the one contract, with one regular payment.

Here’s what it looks like:

  • All interest is frozen on your unsecured debts.
  • Pay one, regular repayment (weekly, fortnightly, or monthly).
  • Payments are based on what you can afford.
  • Payments generally last a maximum of 5 years – and then all unsecured debts are legally discharged.
  • A portion of the debt may be legally written off.

A debt agreement is not a loan – it’s a legal agreement made between you and your creditors. If you owe a debt with someone else, the agreement doesn’t release them from their share of the debt: this is a legal agreement for you alone.

To qualify for a debt agreement, you need to fit some criteria. You can’t:

  • have been bankrupt or been in another debt agreement within the past 10 years,
  • earn more than $86,800.35 annually after tax per week,
  • have assets of more than $115,733.80 (individually), or,
  • have unsecured debts of more than $115,733.80 (individually).

If you don’t meet the criteria, you might still be able to apply for a personal insolvency agreement.

New Leaf manages thousands of agreements. After your agreement is made legally binding – that is, your creditors can’t change their minds – you’ll only have to deal with us. In fact, your creditors aren’t allowed to write to you or call you. So a debt agreement offers huge peace of mind.

Consequences of debt agreements

There are consequences to debt agreements, and these need to be seriously considered before you decide to embark on a debt agreement.

First and foremost, although it’s not bankruptcy, a person who proposes a debt agreement commits an ‘act of bankruptcy’. If your creditor/s decides not to accept your debt agreement proposal, they can use this fact to apply to the court to make you bankrupt.

Information about your debt agreement, including your name, and some other details, will be recorded on the National Personal Insolvency Index (NPII) for a limited time.  When the obligations of your debt agreement have been completed, the NPII notation will be removed, but no sooner than five years from the date the debt agreement commenced.

A debt agreement also affects your ability to obtain further credit. Your details may appear on a credit reporting agency’s records for 5 years, or until your debt agreement is finished. However, if your proposal doesn’t result in a debt agreement being started, then your details have to be removed from credit reporting agency records.

If your proposal is accepted, all unsecured creditors are bound by the debt agreement and will be paid in proportion to the debts owed to them.

Not finalising an agreement allows creditors to recommence recovery of the debt, including backdated interest.  To avoid an agreement being terminated New Leaf will request a ‘variation’ that more meets your affordability level. Once approved you can complete your agreement with lower payments.

Once you complete all of your obligations and payments, you’ll be released from most of your unsecured debts.

What do I have to do?

While you’re under a debt agreement, there are actions you need to follow.

Secured creditors aren’t included in your debt agreement. If you default on your secured loans – that is, you fail to make repayments – your secured creditors may still seize and sell any of your assets (such as your house) that you have offered as security for credit.

If you’re a business owner – whether alone or in partnership – and you’re trading under a business name or assumed name, then you must disclose your debt agreement to anyone dealing with your business. You must also include your full name in your business name for the duration of your debt agreement (e.g. John Smith trading as Smith’s Shop).

Finally, if you’re incurring further debt or obtaining goods and services higher than the threshold amount, you must disclose you’re in a debt agreement.

What about my creditors?

A debt agreement also has implications for your creditors.

During the period where they’re deciding on your proposal, creditors can’t take debt recovery action or enforce a remedy against you or your property. They must also suspend any deductions by garnishee (that is, claiming part) of your income.

Once your debt agreement is accepted, they can’t take any action against you or your property to collect their debts.

How do I start a debt agreement?

New Leaf oversees thousands of debt agreements, and we know the right questions – and answers – about these.

We start by conducting a preliminary assessment of your financial situation over the phone.

Once you formally engage us to act on your behalf, we’ll then conduct credit checks and property valuations, and contact all of your creditors.

We’ll send a debt agreement to all of your creditors to accept or reject. Over 92% of New Leaf’s debt agreements are accepted. For the remaining 8%, we offer a partial money back guarantee. Once the agreement is approved, it becomes legally binding.

From then on, you make one regular payment – and you can get on with the rest of your life.

Find out more

Debt agreements are just one option in a range of debt solutions. For an overview of the options available, take a look here. You must determine whether the information is appropriate in terms of your particular circumstances.

Want to know more about debt agreements or other solutions? Talk to us, and we’ll take you through your options. We’re experts in finding the right debt solutions for people who are experiencing difficulty with their debts.


Please be aware that any figures on this website may change slightly from time to time. They were correct at the time of uploading. Updated October 24/06/2019.

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