debtMedia Release

Bankruptcy and Debt Agreements should be a last resort for debt struggles.

17 January 2013

Australians experiencing severe debt problems are turning to Debt Agreements over Bankruptcy, with a recorded increase of 68% in Debt Agreement numbers since 2007, but a consumer advocate for accurate credit reporting warns that both alternatives fall under the Bankruptcy Act 1966, and should be encouraged only as a last resort for consumers struggling with debt.

New figures provided by Insolvency and Trustee Service Australia (ITSA) show that bankruptcies declined 20% between 1 January 2007 and 31 December 2012, with 150,353 bankruptcies recorded during this period. During the same period, there were 49,034 new debt agreements made, which represents a 68% increase.


Reforms to the Bankruptcy Act in 2007 in the form of the Bankruptcy Legislation Amendment (Debt Agreements) Act 2007, aimed to improve the operation of the debt agreement regime.

Attorney-General Nicola Roxon recently said debt agreements provide better outcomes for someone’s financial circumstances, and may allow those people in debt the chance to save their home.

“Debt agreements give many Australians in financial distress an alternative option to get back on their feet sooner than bankruptcy,” Ms Roxon said.[ii]

“Debt agreements in many cases can be the smarter way forward especially as bankruptcy can leave a financial legacy that can affect people for years.”

But CEO of MyCRA Credit Rating Repair, Graham Doessel says whilst formal Debt Agreements may be preferable to Bankruptcy in many cases, it is important for consumers to know that both options are part of the Bankruptcy Act 1966, and therefore when proposed or implemented, record a Bankruptcy Notation on the consumer’s credit file.

“A formal Debt Agreement may be a nice form of Bankruptcy, but make no mistake – it is still part of the Bankruptcy Act 1966. Both options will impact a consumer’s credit file and ability to obtain credit for 7 years. But what’s more, the debtor will be allocated a Bankruptcy number, which remains part of their credit history for life,” Mr Doessel says.

The debtor’s name and other details appear on the National Personal Insolvency Index (NPII), a public record, for the proposal and any debt agreement.[iii]

He says other than difficulties obtaining credit, having a Bankruptcy recorded can also impact business situations, and in some cases may impact employment opportunities.

“You can’t get away from this notation, and answering the question ‘Have you ever been Bankrupt or entered into a Debt Agreement?’ incorrectly constitutes fraud,” he says.

He says consumers owe it to themselves to exhaust all other options before they enter a Debt Agreement.

“Talk to your Creditors – most don’t want to have to commence legal action against you, and will try to help you with repayment variations if they can,” Mr Doessel says.

If Creditors have not commenced legal action yet, a consumer struggling to make repayments may be entitled to relief under financial hardship provisions.

From March 2013, the Consumer Credit Legislation Amendment (Enhancements) Bill 2012 will take effect, allowing for greater ease of request for financial hardship variation and will generally be encouraged as a deterrent to any kind of credit file blemish or prior to someone having a court Judgment or a last resort-Bankruptcy filed against them.[iv]

Mr Doessel says it is important for people not to bury their head in the sand, and to recognise and address financial difficulty early.

“By catching it early, and avoiding a Default, Writ, Judgment or Bankruptcy on your credit file, when you’re back on your feet you could have the option to borrow again – even for basics like a credit card or mobile phone plan,” he says.

‘Dealing with debt: Your rights and responsibilities’ is a government publication which gives people information on dealing with debts, debt collectors and disputes. It is available through the ASIC ( ) or ACCC websites


Please Contact:

Graham Doessel – PH 3124 7133

Lisa Brewster – Media Relations 246 Stafford Road, STAFFORD QLD. Ph: 07 3124 7133

MyCRA Credit Repairs is Australia’s leader in credit rating repairs. We permanently remove defaults from credit files.






Image: renjith krishnan/