Debt & Bankruptcy Lawyers › Debt Agreements
Debt Agreement Lawyers — Part IX. A Legal Alternative to Bankruptcy.
A Part IX debt agreement under the Bankruptcy Act 1966 is a legally binding arrangement between a debtor and their unsecured creditors — paying an agreed proportion of the debt over time (typically 3–5 years) without going bankrupt. A debt agreement is available to debtors who meet income and asset thresholds, and is recorded on the credit file and NPII for a shorter period than bankruptcy. A debt lawyer advises on eligibility and manages the proposal, creditor vote, and administration.
⚠ Once a debtor files a Part IX proposal, an automatic stay on enforcement action takes effect — stopping garnishee orders and creditor proceedings. The proposal must be submitted to AFSA within 14 days of signing. Get legal advice before creditors escalate.
Debt Agreement Matters We Handle
From eligibility assessment to creditor vote — the complete Part IX process.
Eligibility Assessment
A Part IX debt agreement is only available to debtors who meet the income, asset, and debt thresholds set by AFSA (adjusted annually). The after-tax income threshold is approximately $116,000 per year; the asset threshold is approximately $116,000; and the total unsecured debt threshold is approximately $116,000. A debtor who is insolvent but exceeds any threshold is not eligible for a Part IX agreement and must consider bankruptcy or a Part X personal insolvency agreement instead. A lawyer confirms eligibility before the proposal is lodged.
Proposal Drafting
The debt agreement proposal must set out the terms of the arrangement — the total amount to be paid to creditors, the payment period (up to 5 years), the instalment amount, and what happens if the debtor defaults. A lawyer drafts the proposal to maximise the prospects of creditor acceptance — calculating a dividend that is higher than what creditors would receive in bankruptcy, which is the key incentive for creditors to vote in favour.
Creditor Vote Management
AFSA circulates the proposal to all creditors, who have 35 days to vote. The proposal is accepted if creditors representing a majority in number and value of voting creditors vote in favour. A lawyer identifies and communicates with key creditors before the vote — particularly large creditors whose votes can determine the outcome — and addresses any concerns that might lead to a rejection of the proposal.
Variation of a Debt Agreement
Where a debtor's financial circumstances change during the term of the debt agreement — income reduction, job loss, or unexpected expense — the agreement can be varied to reduce the payments or extend the term. A lawyer advises on whether a variation is appropriate and manages the variation proposal and creditor vote. Failure to make payments without a variation puts the agreement in default — which can result in the agreement being terminated and the debtor returning to full liability for the original debts.
Termination and Default
A Part IX debt agreement can be terminated by the debtor (voluntarily) or by the administrator (for non-payment). On termination, the debtor's original debts (reduced by any dividends paid under the agreement) are restored — and creditors can recommence enforcement action. A lawyer advises on the consequences of termination and on the options available (including bankruptcy) if the debt agreement cannot be maintained.
Part X Personal Insolvency Agreements
A Part X personal insolvency agreement (PIA) is a more flexible alternative to a Part IX debt agreement — available to debtors who exceed the Part IX thresholds or who need more complex arrangements (such as a lump sum settlement or sale of an asset). A Part X PIA requires the appointment of a registered trustee who takes control of the debtor's property, negotiates with creditors, and supervises the implementation of the agreement. A lawyer advises on whether a Part X PIA is more appropriate than a Part IX agreement in the debtor's circumstances.
The Legal Framework
Debt agreement law — Bankruptcy Act 1966 (Cth) Part IX, administered by AFSA.
Part IX thresholds — eligibility criteria (2024–25)
To be eligible for a Part IX debt agreement, the debtor must: (1) be insolvent (unable to pay debts as and when they fall due); (2) not have been bankrupt, made a debt agreement, or entered into a personal insolvency agreement within the preceding 10 years; and (3) have after-tax income below the threshold (approximately $116,389 per year), divisible property below the threshold (approximately $116,389), and unsecured debts below the threshold (approximately $116,389). These thresholds are indexed and adjusted annually by AFSA.
The automatic stay — protection from enforcement
Under s 185K of the Bankruptcy Act, when a debtor lodges a debt agreement proposal with AFSA, an automatic stay takes effect — preventing creditors from commencing or continuing enforcement action (including garnishee orders, creditor proceedings, and writs of execution) against the debtor. The automatic stay remains in place until the proposal is accepted, rejected, or withdrawn. The stay is a critical protection for debtors who are facing active enforcement action while the proposal is being considered by creditors.
The creditor vote — majority in number and value
A Part IX debt agreement is accepted if creditors who vote (creditors who do not vote are excluded from the calculation) represent both a majority in number and a majority in value. Both tests must be satisfied — a proposal can fail if a small number of large creditors (by value) vote against it, even if a majority in number vote in favour, or vice versa. A debt lawyer identifies the key creditors and manages the communication process to maximise the prospect of a successful vote.
NPII and credit file — the record impact
A Part IX debt agreement is recorded on the NPII permanently (like bankruptcy) and on the debtor's credit file for 5 years from the date the agreement ends (the date the final payment is made and the administrator issues a certificate of completion). For a 3-year agreement, the total credit file impact is approximately 8 years from the date the agreement was entered into. This is broadly similar to bankruptcy — but a debt agreement does not result in the loss of assets and does not prevent the debtor from being a company director.
Secured vs unsecured creditors — the key distinction
A Part IX debt agreement only covers unsecured debts — it does not affect secured creditors (mortgage holders and other creditors with security over the debtor's assets). Secured creditors can still enforce their security during a Part IX agreement — for example, a mortgagee can still exercise its power of sale if the debtor defaults on mortgage repayments. A debt lawyer advises on the interaction between a Part IX proposal and any secured creditors — including the family home mortgage — before the proposal is lodged.
Non-dischargeable debts — what a Part IX agreement does not release
Like bankruptcy, a Part IX debt agreement does not release the debtor from certain non-dischargeable debts — including child support and maintenance obligations, HECS-HELP debts, court-imposed fines and penalties, and debts arising from fraud. A debtor who has significant non-dischargeable debts needs to consider whether the Part IX agreement will actually provide meaningful relief from their total debt burden — or whether those non-dischargeable debts will continue to be unmanageable even after the agreement is completed.
How It Works
One request. Free debt agreement advice.
Tell us the total unsecured debt, the main creditors, your after-tax income, your assets, and whether any enforcement action has commenced. A debt lawyer will advise on Part IX eligibility.
Submit Your RequestDescribe the debt situation
Total unsecured debt, main creditors, after-tax income, assets, whether any creditor has commenced proceedings, and prior insolvency history (last 10 years).
Matched to a debt lawyer
Matched to a debt lawyer with experience in Part IX debt agreements — who knows the AFSA proposal process, the creditor vote requirements, and how to structure a proposal that creditors are likely to accept.
Free consultation
A debt lawyer contacts you for a free consultation — advising on Part IX eligibility, the likely dividend to creditors, the chances of a successful vote, and whether a debt agreement is the right option for your circumstances.