FAQs

An Informal Debt Agreement is a negotiated agreement between you and your creditors that sets up a personalised plan to help you manage and repay your debts. An informal debt agreement is not a formal ‘Debt Agreement’ under the Bankruptcy Act (Part 9 or Part 10). It’s an informal arrangement negotiated directly with your creditors.

For some people, an informal arrangement may have different impacts compared with options like Part 9 or Part 10 Agreements or Bankruptcy. Each option has serious consequences, so it’s important to get independent advice before deciding.

In an Informal Debt Agreement, we help you work out repayment terms that work for both you and your creditors. This may include:

• your creditors agreeing to remove or lower late and overdue fees
• your creditors agreeing to stop interest from being added
• your creditors accepting a repayment plan you can afford

In some cases, we may also be able to reduce the total amount you owe.

Whether an Informal Debt Agreement is right for you will depend on your personal circumstances. Informal Debt Agreements are ideal in situations where you suddenly find you are unable to maintain repayments on your debts due to a change in your life circumstances.

Situations in which an Informal Debt Agreement might be suitable are when you are experiencing:

• Loss of employment
• Sudden illness or injury
• An unexpected change in your personal circumstances, such as being separated or getting a divorce.

They may be worth considering if you’re worried that a formal insolvency option (like Bankruptcy or a Part 9/Part 10 agreement) could affect your job, professional registration, or access to credit in the future. However, an informal arrangement can still be visible to lenders via financial hardship information.

An informal arrangement is not right for everyone. You should also consider other options (including speaking with a free financial counsellor) to make sure you choose the option that best suits your needs.

We will assess your debts and advise which debts can be included in your Informal Debt Agreement.

Informal arrangements can sometimes be negotiated for:

• secured debts (such as car loans and mortgage arrears), usually by setting up more manageable repayment plans or hardship variations; and
• unsecured debts (such as credit cards, personal loans, utilities, telecommunications and some medical bills).

for government fines (like speeding fines), we may be able to help you request a payment arrangement, but any reduction or waiver is at the discretion of the relevant authority and may not be possible.

An informal arrangement is one possible alternative to formal Debt Agreements and Bankruptcy. Which option is best will depend on your situation, and you should consider independent financial counselling or legal advice before deciding,

Other benefits of an informal debt agreement may be that they:

• Work with your creditors to reduce debt collection calls
• Work with your creditors to reduce or freeze debt related interest and fees
• Work with your creditors to negotiate affordable payment arrangements, and
• May, if a creditor agrees, reduce or waive your debt based on your personal circumstances
• Don’t have to include all your creditors.

With an informal debt agreement, you do need to stick to the payment arrangements that have been negotiated with your creditors and make your repayments on time to keep the arrangement in place and receive the full benefit of it.. Should you default on your payments, your creditors may treat the arrangement as cancelled and may resume their usual debt collection processes, which can include collection calls, default notices or legal action.

Your creditors may ask you to provide updated information (like income and expenses) from time to time, so they can confirm you’re still experiencing hardship and keep the arrangement in place. Your debt may increase while negotiations take place with your creditors and there are no guarantees that your creditor will agree to enter into an Informal Debt Agreement with you.

If your creditor agrees to a financial hardship arrangement, they may record this as financial hardship information on your credit report.

This hardship information:

• is shown as a marker next to your repayment history;
• stays on your credit report for 12 months from when the arrangement ends; and
• is not used in calculating your credit score, but lenders can still see it and may ask questions about it.

If you miss payments or pay more than 14 days late, this can lead to late payment markers or defaults being recorded, which can affect your credit score and ability to get credit in the future.

Depending on your personal circumstances, an Informal Debt Agreement may not be the most suitable debt relief option for you. Alternative solutions may include:

• Debt Consolidation
• Home Loan Refinancing
• Formal Debt Agreements (Part 9 or Part 10).

Each of these options has different costs, risks and long-term consequences. It’s important to compare them carefully and, where possible, get independent financial counselling or legal advice before deciding. 

You can apply through the National Debt Helpline (1800 007 007 or visit their website) or through a financial counsellor. These are both free options.

Alternatively, many people choose to work with an experienced debt negotiation team with a clear understanding of the law and what is required to make an Informal Debt Agreement. We have the experience and knowledge needed to help you develop and present an informal proposal to your creditors, and we will always explain our fees so you can decide if our service is right for you.

The cost of proposing an Informal Debt Agreement to your creditors will depend on the amount of debt that you have, your current affordability, and based on that the amount of time you need to pay your creditors back. Plans are usually between 1-5 years.

We will explain our fees upfront in writing before you decide to go ahead, and there is no obligation to proceed after your initial consultation.