What is a debt agreement?
A debt agreement is an alternative to bankruptcy favoured by many consumers with credit card, mobile phone, personal and car debts. Debt agreements are also favoured over bankruptcy by lenders and the federal government because they deliver more money back to creditors than bankruptcies. In the last decade the number of insolvent consumers signing debt agreements has boomed. The industry has been pushed along by marketing promoting debt agreements as a debt consolidation option for people overloaded with debt.
With names like ‘Debt-Busters’, many debt agreement administrators have been forced out by reforms to clean up the industry. There were more than 2,000 debt agreements signed in the three months to March 31, up 5.7 per cent on the December quarter. Last year, the number of new Part IX debt agreements skyrocketed up 29.5 per cent to 8567 new agreements started. Reforms to the Bankruptcy Act, now before the Senate, will favour debt agreements over personal bankruptcies for indebted consumers.
Source: Banking Day