Considering a Part 9 debt agreement? Explore all your options first

A Part 9 debt agreement is one option available to Australians experiencing serious financial hardship. It can provide a structured pathway forward, but it is also a formal insolvency arrangement under Australian law. It is important to understand the consequences and explore your other options before making a commitment.

If you have started searching for a Part 9 debt agreement, also known as a Part IX debt agreement, chances are things feel pretty overwhelming right now.

You may be juggling multiple debts, struggling to keep up with repayments or feeling the pressure of creditor calls and overdue bills. When financial stress starts affecting your sleep, relationships or peace of mind, it is natural to look for a debt solution that offers relief.

A Part 9 debt agreement (sometimes written as a Part IX debt agreement) is a legally binding, formal insolvency agreement under the Bankruptcy Act 1966 between you and your creditors to repay an agreed, affordable portion of your unsecured debts. It serves as an alternative to bankruptcy, freezing interest and fees while you pay off what you owe over a set timeframe.

The Part 9 debt agreement framework in Australia is designed specifically for people who cannot reasonably repay their debts in full but want to avoid the more severe restrictions of bankruptcy.

Common debts included in a debt agreement may include:

• Credit cards
• Personal loans
• Store cards
• Buy Now, Pay Later (BNPL) debts
• Unsecured lines of credit
• Certain unpaid utility bills.

Not everything can go into a Part 9 debt agreement, and the debts that stay outside it still need paying.

Secured debts are excluded

Your mortgage and any car loan secured against the vehicle stay with your lender and you keep paying them directly. Fall behind on those and the lender can still repossess the asset. Court fines, child support and most study loans generally can’t be included either.

Joint debts work differently

The debt goes into your agreement, but the other borrower stays liable for the full amount, so creditors can pursue them for the balance. The same applies to anyone who has guaranteed a debt for you. Worth a conversation with them before you lodge.

A Part 9 debt agreement moves through four stages: preparing a proposal, lodging it with AFSA, a creditor vote, then a fixed period of repayments.

You start by appointing a registered debt agreement administrator. They review your income, assets and debts, then help you build a proposal setting out how much you can afford to pay and over how long. That proposal goes to the Australian Financial Security Authority (AFSA) for processing.

Once AFSA accepts it, your creditors generally have 35 days to vote. Not all of them have to agree. The proposal passes if creditors holding a majority by dollar value of the votes cast say yes. If it passes, it binds every unsecured creditor with a provable debt, including the ones who voted no and the ones who didn’t vote at all. 

From there you make one regular payment to your administrator. They take their fees, then pass the rest to your creditors. You stop paying creditors directly, and while the agreement runs they can’t add interest or take recovery action against you.

Complete the payments and you’re released from the unsecured debts the agreement covered.

Most agreements run for three years. If you own your home, you may be able to propose a term of up to five, and in limited circumstances an existing agreement can be extended.

Creditors can vote no, and it’s worth understanding that outcome before you start.

If the vote fails, there’s no agreement. Your debts return to where they were, interest resumes, and creditors can restart collection and legal action. Depending on why it was rejected, your administrator may be able to lodge a revised proposal. Set-up fees you’ve already paid usually aren’t refunded.

There’s a further consequence that catches people out. Under the Bankruptcy Act, proposing a debt agreement is itself an “act of bankruptcy”. If your proposal is rejected, or your agreement is later terminated, your creditors can point to that act of bankruptcy when applying to the court to make you bankrupt.

This is one of the strongest reasons to test informal options properly before you lodge anything.

While a formal agreement can freeze interest and stop creditor contact, it represents a significant legal step, and there are credit and lifestyle impacts you need to be aware of.

A drop in your credit score

A debt agreement can make it much harder to obtain new credit. It is recorded on your credit report for at least five years from the date it starts, and in some circumstances it can remain there longer.

The NPII register

Your debt agreement is recorded on the public National Personal Insolvency Index (NPII). This includes your name, date of birth, and address. If you complete it, the record is generally removed five years after the agreement was made, or when your obligations are complete, whichever is later.

Rental challenges

Some real estate agents and landlords perform NPII searches, which may affect your rental applications.

Employment restrictions

Certain professional associations, licensing bodies, or industries (such as financial services, real estate, or law enforcement) may restrict individuals with insolvency records.

While the agreement is in force you must disclose it when applying for credit above a set limit. That limit is indexed and published by AFSA.

Falling behind on bills or repayments is a problem to solve, not a verdict on your character. When you can’t keep up with a credit card or a loan, the response is rarely just practical. Shame shows up too, and it makes clear thinking harder. It’s why so many people hide the problem, avoid asking for help, and then rush toward whatever will make the pressure stop fastest.

Falling behind doesn’t mean you lack discipline or intelligence. Usually it means rising living costs, an unexpected setback, or a stretch where the numbers simply haven’t worked in your favour. Asking for help is a step forward, not an admission. If you are already falling behind, our guide on what to do when you can’t pay your bills outlines practical steps you can take immediately before the situation worsens.

Two terms do a lot of work in the eligibility rules, so it helps to properly understand what they mean.

Insolvent means you can’t pay your debts as they fall due. It’s about timing and cash flow rather than the total you owe. You can be insolvent while still owning things of value.

Unsecured debt is debt with no asset attached as security. Things like credit cards, personal loans, store cards, buy now, pay later (BNPL) accounts and most utility bills. Secured debt is tied to something the lender can take back, like your mortgage or a car loan. Only unsecured debt counts toward the AFSA limits below.

To be eligible for a Part 9 debt agreement in Australia, you must be insolvent, have not been bankrupt or in a debt agreement in the last 10 years, and fall below specific thresholds for unsecured debt, assets, and after-tax income set by the Australian Financial Security Authority (AFSA).

You may be eligible for a Part 9 debt agreement if you meet the following official statutory limits (updated by AFSA as of March 2026):

• Unsecured debt limit: Your total unsecured debts must be less than $150,950.80
• Divisible property limit: Your total divisible assets (excluding protected property like basic household items and tools of trade) must be worth less than $301,901.60
• After-tax income limit: Your expected after-tax income (which you can estimate using our free Income Tax Calculator) for the next 12 months must be less than $113,213.10.

Eligibility is only one part of the decision-making process. Factors such as your household expenses, your mortgage commitments, and your future plans should also be considered when assessing whether a debt agreement is appropriate.

A Part 9 debt agreement may help you manage unsecured debts while you keep paying your mortgage. However, it does not protect your home from your mortgage lender. Your mortgage remains outside the agreement, so you must continue making repayments and your lender can still take action if you fall behind.

For many homeowners experiencing financial stress, protecting their property is the highest priority when exploring debt solutions. Unlike bankruptcy, a Part 9 debt agreement does not automatically put your assets under a trustee’s control. Instead, you propose an affordable repayment arrangement for your unsecured creditors while continuing to meet your secured loan commitments.

Because a Part 9 debt agreement is a formal insolvency arrangement, it can make refinancing or obtaining a new home loan more difficult. Consider getting independent financial advice before deciding whether it is the right option for you.

Choosing a debt solution comes down to two questions: how much pressure you’re under, and how much of your credit report you’re willing to trade to relieve it. As a rule, the least restrictive option that genuinely clears your debts is the right one.

Free financial counselling is also available through the National Debt Helpline on 1800 007 007. A financial counsellor can provide independent information about your options and legal rights, including where your income is low, irregular or unreliable. You can contact them at any stage while considering the debt solutions below.

Here are alternative options, from least restrictive to most.

1. Ask your lender for hardship help. If a temporary setback is behind the pressure (a job loss or an unexpected bill) start with your lenders directly. Most have hardship teams that can pause repayments, freeze interest or adjust your loan terms for a period. It’s free, it’s informal, and nothing about it goes on a public register.
2. Consolidate with a new loan (MyBudget Loans). If your credit report is still in reasonable shape, you may be able to take out a debt consolidation loan to clear several high-interest debts, leaving you with a single repayment at a lower interest rate. This is ordinary borrowing, not insolvency. Nothing is recorded against you under the Bankruptcy Act. Approval depends on your credit history and income, so this option narrows the longer you leave it.
3. Get your budget managed for you (MyBudget). If you’re earning steadily but the volume of bills, cards and due dates has got away from you, a managed budgeting service can take that over. We build a 12-month plan around your real income and expenses, negotiate with your creditors, and pay your bills for you. You pay down your debts within your means and avoid adding an insolvency marker to your credit report.
4. Propose a Part 9 debt agreement. If your unsecured debts are beyond what you can repay in full and you have assets like a home to protect, a Part 9 debt agreement may be the right step. We don’t administer these agreements. What we can do is review your whole position first and check whether an informal option would resolve things without the five-year credit consequences. If a Part 9 debt agreement really is the best path, learn more about MyBudget’s debt agreement support and what happens next.
5. Consider bankruptcy. The last formal option. It can release you from most unsecured debts, but it carries the heaviest consequences. A trustee may sell assets including your home, you’ll need permission to travel overseas, you’ll pay income contributions if you earn above set thresholds, and you can’t be a company director without the court’s approval. If it’s your only realistic option, you don’t have to do it alone. We can help you get your paperwork together and build a clean budget for the other side.

Results depend on your situation. The right answer for someone with a temporary income dip looks nothing like the right answer for someone carrying $80,000 in unsecured debt on a modest wage.

Not sure where you sit? Our free guide, 10 Steps to Get Out of Debt, walks through a practical framework for working it out.

The cost of a Part 9 debt agreement includes an AFSA proposal-lodgement fee, an administrator’s fees and government levies. These costs are regulated and detailed under the official AFSA fees and charges directory, and are typically built directly into your single regular repayment so they are paid out of your agreed contribution rather than as extra upfront bills.

Before entering into an agreement, your administrator must provide a clear fee disclosure, which generally includes:

• Setup and lodgement fees: A statutory lodgement fee (currently $200) is payable to AFSA when your proposal is submitted, though some administrators may also charge their own professional setup fee to arrange and compile the proposal documents
• Ongoing administration fees: A fee charged by your registered administrator to manage your agreement over its duration. This fee must be clearly disclosed in your debt agreement proposal and approved by your creditors before the agreement begins
• Government levies: A statutory levy known as the realisations charge (currently set at 7% of all funds received in the administration of your agreement) is automatically paid to AFSA to cover the costs of running and regulating the personal insolvency system.

Before you sign, check the total you’ll repay, how much of your money goes toward clearing your debts, and how much is kept by the administrator.

A Part 9 debt agreement can help with credit card debt by freezing interest charges and combining your outstanding credit card balances, personal loans, and other unsecured debts into a single, affordable repayment plan.

Credit cards often carry high interest rates, making it challenging to reduce the principal balance when you are only making minimum repayments. A debt agreement can stop the interest cycle, allowing your payments to directly reduce what you owe.

However, a debt agreement is not the same as standard debt consolidation. A debt consolidation option combines your debts into a new, regular bank loan, whereas a Part 9 debt agreement is an act of insolvency under the Bankruptcy Act with lasting legal consequences.

A Part 9 debt agreement is a negotiated plan to pay back an affordable portion of your debts over time, whereas bankruptcy is a legal process that can release you from most unsecured debts but may involve asset sales and strict income thresholds.

Understanding the difference is crucial for protecting your assets and making an informed choice:

MyBudget helps you choose the right debt solution by assessing your complete financial situation, mapping out a clear 12-month roadmap, and showing you whether an informal budget strategy can resolve your debts before you commit to formal insolvency.

A clear diagnostic check on your money

Think of MyBudget as a supportive first step. Before you commit to a formal insolvency agreement or bankruptcy, our Money Coaches look at your real, day-to-day cash flow, mapping out every bill, repayment, and cost-of-living expense over a full year.

This personalised 12-month plan shows you exactly what is possible, helping you determine whether an informal, flexible budget system can get you back on track or if a formal option is more appropriate. If a formal debt agreement is your best path, we can seamlessly connect you with our sister company, MyDebtSolutions.

Note: MyBudget is a budgeting and money management service. While we do not administer formal legal debt agreements directly, we work closely with our sister brand, MyDebtSolutions, who are registered Debt Agreement Administrators and can guide you through the process.

Technology that builds certainty

One of the biggest challenges people face when dealing with debt is uncertainty. Not knowing which bills to pay first, how long it will take to get back on track, or whether a debt agreement is even necessary can make financial stress feel overwhelming.

That is why MyBudget combines a clear, practical budgeting system with the support of a dedicated Money Coach. Our technology provides a clear 12 month roadmap showing where your money is going, when bills will be paid, and what your path toward improved financial wellbeing looks like over time.

Before signing a debt agreement, you should obtain a complete, independent assessment of your finances, understand the five-year credit score impact on your credit report, and explore informal budgeting alternatives that might help you avoid formal insolvency.

A Part 9 debt agreement can be an effective solution for some people experiencing significant financial stress, but other debt solutions may provide a better outcome without the long-term impact on your credit score.

At MyBudget, we have helped more than 130,000 Australians gain clarity about their financial situation and understand the solutions available to them.

Budgeting and debt relief work best when they address the root cause of your cash-flow pressure. Before committing to a legally binding, five-year insolvency arrangement that impacts your credit score, it’s worth testing whether a structured budget and professional negotiation can resolve your debts informally.

Struggling with debt stress can feel isolating, but you don’t have to figure it out alone. Book a free, confidential chat with a MyBudget Money Coach today. We will help you look at your options, map out a clear 12-month budget, and build a realistic plan to get your money sorted, completely pressure-free and with zero judgment.

Book Your Free Appointment or call us on 1300 300 922.