A Formal Debt Agreement

Formal Debt Agreements are often used as an alternative to going bankrupt and by managing a Formal Debt Agreement instead of going Bankrupt it can save your assets as well as stopping interest..

A Part 9 Debt Agreement combines all existing unsecured debts into a Proposal where you only have to make one payment.

The debt or repayments that can be covered in a Part 9 Debt Agreement are unsecured personal loans or debts. Some examples of these debts are, bills, overdrafts, credit card/store cards, school fees, personal loans, Tax  (ATO) Debts, Utility bills and many more. Any debt which has an asset attached to it, is not included in a Formal Debt Agreement as receiving dividends unless there is a shortfall.

Payments towards your secured creditors are allowed in the budget. Mortgage and car loans are listed on the Formal Debt Agreement Proposal, that you will maintain normal contractual payments with these loans.

Registered Formal Debt Agreement Administrators are regulated by the Federal Government, Australian Financial Security Authority (AFSA). Melissa Glenn and Australian Debt & Insolvency Solutions Pty Ltd are registered Formal Debt Agreement Administrators with AFSA.

An accepted Part 9 Debt Agreement offers a way for you to make a weekly, fortnightly or monthly repayment that is assessed according to your budget, ie. income less living expenses including mortgage and car payments, some entertainment, clothing etc. Whatever is leftover is offered to your creditors via a formal Debt Agreement Proposal.

One immediate benefit of an accepted Formal Debt Agreement is that it gives you relief from people who are chasing you for money now. Any legal action taken against you to recoup money will be ceased, and no more interest payments can be added by your creditors. A Formal Debt Agreement also does not attract interest charges, so all you will need to repay is the balance of your Formal Debt Agreement and the RDAA setup fee (as disclosed in FAQ’s)

When you have finished paying off the Part 9 Debt Agreement, all of your previous unsecured debts will be considered legally closed. As mentioned, the Bankruptcy Legislation has strict rules and thresholds which apply to Part 9 Debt Agreements, which is regulated by AFSA (federal government). We can help make sure you comply with all of them and streamline the application process. These are the four main points for consideration when applying for a Formal Debt Agreement. It is important to note that the government do change the amounts mentioned every 6 months on 20th March and 20th September in accordance with CPI (Consumer Price Index) .

  • Your take home pay can’t exceed $1,651.12 per week.
  • The amount of debt to be included must be less than $114,478
  • Your total assets can not be valued higher than $114,478
  • You can only have one Formal Debt Agreement in any 10 year period (from the time you’ve finished). Also you cannot lodge a Formal Debt Agreement if you have been bankrupt, had a previous Formal Debt Agreement or a 188 Authotrity (Part 10 PIA Agreement) in the last ten years.

Some important points to consider before applying for a Formal Debt Agreement are. 

A Formal Debt Agreement will appear on your credit history for:

  • The period of 5 years that starts on the day on which the agreement is made;
  • The period that ends on the day on which the agreement ends.


Your name will be listed on a National Personal Insolvency Index (NPII) for 5 years. This is a record held by AFSA and they will charge a search fee to look up this information. This is different to your credit history records.

  1. All unsecured debts must be declared in the Formal Debt Agreement, you can’t just pay of some of your debts.
  2. It is not mandatory for the creditors you owe money to, to accept a Formal Debt Agreement. If they do not accept it, ADAIS will resubmit it with some changes based on their reasons for the rejection. If a second Formal Debt Agreement Proposal is re-lodged ADAIS will not charge another setup fee, however AFSA will charge another $200 lodgement fee.
  3. Part 9 Debt Agreements are very flexible. If you want to pay it off faster than agreed that is fine. There are no fees or charges for making additional repayments. You must however, always make your minimum payment.
  4. A Formal Debt Agreement needs a majority (ie, more than 50%) in the value of unsecured debts, to accept the Formal Debt Agreement. Those who vote ‘No’ are legally bound by it if the majority vote is ‘Yes’.

ADAIS have helped thousands of Australians successfully manage a Formal Debt Agreement and benefit greatly from taking this action. They are complicated to arrange and setup however we will do the paperwork while you focus on your business or work commitments. All of your information will be kept in the strictest of confidentiality. To find out more, or to begin the Formal Debt Agreement process, why not give us a call today. Alternatively you could complete the contact form on this website and a we will call you back soon.

*A Part 9 Debt Agreement is also known as a Part IX Debt Agreement.