debt agreement

What is a Part IX Debt Agreement

One of the most common questions we get asked is what is a part IX Debt Agreement and what’s the difference between this and bankruptcy.

Many people when looking for options to assist them in releasing themselves of debts, will most likely come across this option.

Truth be told as a company The Bankruptcy Team recommends a Part IX Debt Agreement over bankruptcy, however this post is to educate you around what exactly a Part IX Debt Agreement is and how it works.

The single most important thing to do when weighing up your options is to seek professional advice, whether it’s through us or another reputable firm you should do this first.

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part ix debt agreement

What is a Part IX Debt Agreement?


A Part IX Debt Agreement is quite often called a Debt Agreement. These are basically the same thing. So if you hear either of these words they are speaking about the same thing.

When you engage in a Part IX Debt Agreement it is a legally binding agreement under the bankruptcy act that is between you and your creditors.

There are 2 main components when you are negotiating a debt agreement

  1. The amount to be repaid

Usually you will repay anywhere from 65% – 100% of the total debt amount.

  1. The timeframe that it’s paid back (usually between 3 – 5 years)

After these 2 items are selected it is then voted on by your creditors, if the majority vote yes then you will have an active debt agreement in place that you must stick to.

The main problem that many come across is that the agreement that they have been accepted for is higher than they can usually afford. The majority of Part IX Debt Agreements last years longer than usual, this results in the person paying back the debt far longer than they anticipated.

Is a Debt Agreement an alternative to bankruptcy?


Yes it is, however I can never really think why…

If you owed $60,000 in debt and negotiated to pay back $40,000 over 4 years @ $192 a week. Would you choose to do this rather than release yourself of debt through bankruptcy and use this $40,000 that you could save to either. Use as a deposit, living expenses or invest in your own wellbeing….? As you can see we are biased against Part IX Debt Agreements as they usually only benefit the creditors and the person managing the debt agreement, not the individual.

One thing to remember is that a debt agreement isn’t a consolidation loan & you aren’t able to include all debts:

You can’t include the following:

  • Child Support Arrears
  • Parking infringements / SPER debts
  • HECS / FEE Help Debts
  • Debts taken out in fraud
  • Some court ordered debts

What are the consequences of a Part IX Debt Agreement

A good resource is the Australian Financial Security Authority site: however we’ve collated the information you need in this post.

This is where a lot of people get told lies. When you’re getting advice you want the person to be able to provide advice based on the pro’s and con’s on all options:

  • Debt agreements
  • Bankruptcy
  • Personal Insolvency agreements

The 3 of these are very different and have different ways they operate:

Part IX Debt Agreements & Personal Insolvency Agreements are designed to repay most of the debt back to the creditor, with bankruptcy releasing you fully of most debts. So, if you are looking at your options.

If you have no substantial assets to lose then you need to really think about why someone would put you on a debt agreement rather than bankruptcy. They say that it’s better than bankruptcy and use scare tactics but nothing could be further from the truth.

How will a Part IX Debt Agreement affect you:

  • The total of your unsecured debts must be below $118,063.40
  • If you have equity in a property or investments worth over $236,126.80 you cannot be under a debt agreement
  • You cannot propose a debt agreement if your “net – after tax” income is above $88,547.55
  • A Part IX Debt Agreement will be lodged on your credit file and will remain for 5 years so seeking credit will be difficult
  • Many times the amount negotiated to pay each week / fortnight is higher than you can afford and many debt agreements get extended up to 7 years…
  • If you don’t have any assets to lose why would you pay the debt back rather than release yourself from it?
  • You will be lodged onto the National Personal Insolvency Index
  • Could be restrictions for professional bodies or trade association memberships based on the debt agreement status
  • You have to pay back most of the debt


The real main differences between why we recommend a Part IX Debt Agreement is if you have say $200,000 equity or less in your house and have about $50,000 debts. You can negotiate to pay back $30,000 over 3 years or $192 a week and keep the house as it’s under the $236,126 asset threshold.

If your property equity is more than $236,126 which is the cuttoff level for the Part IX Debt Agreement then you should seek further advice about your situation:

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Also you can still act as a director when under a Debt Agreement whereas you can only trade as a sole  trader when bankrupt.

So when looking at whether a Part IX Debt Agreement is a suitable option you need to look at your current situation.

As you can see we rarely recommend a Debt Agreement. We focus on benefiting our clients always and we have found 95% fit in the Bankruptcy and Personal Insolvency Agreement options. With, the majority of debt agreements benefiting the creditors and not the individual who is placed into the debt agreement.

If you’re unsure, we have a detailed FAQ’s section and also a detailed BLOG section on our site. you can find the answers to all your questions here.


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