NDAs are covered by Part IX of the Bankruptcy Act. They are an option to bankruptcy, in which an accredited provider (such as a lawyer) negotiates with your creditors to come to an arrangement (normally where the debt is reduced or paid off over a long period of time).
If the majority of your creditors accept your proposal then the debt agreement will start and all creditors will have to accept the terms of the agreement.
All creditors will receive the same proportion of the amount you owe.
Some debts are not covered by NDAs:
- Joint debts
- Child support
- Fines, penalties or other court-ordered payments
- Student HECS or HELP, Student Financial Supplement Scheme debts
Entering the NDA is an act of bankruptcy, so your creditors can use it to make you bankrupt in any case (if you don’t make payments for 6 months). You’re also on the National Personal Insolvency Index permanently. Bankruptcy lasts 3 years, then it is on your credit file for 2 years.
Generally, seems that under s185C (2AB) of the Bankruptcy Act, a NDA payment period it can’t be for more than 3 years unless you own your own home.
You can vary the NDA if requied generally (if you can say you have suffered a substantial change in circumstances after the agreement was made that was not foreseen at the time the agreement was made).
Recent legislative changes tighten the NDA system by ensuring:
- Only registered administrators, the Official Trustee (AFSA) or registered trustees can administer debt agreements.
- Administrators must pass a “fit and proper test” and have personal indemnity insurance.
- New offences apply to failure to “maintain trust accounts for debtors’ funds” and “failure to keep records.”
- Debt agreements are limited to a three-year period (compared to the previous and common practice of a four- to five-year term)—unless they have equity in their principal residence, then a five-year term is allowed.
If you need relief from debts and would like to consider a NDA, consult a lawyer to ascertain whether they can assist or refer you to a service that can.