Low-income earners can make the most of debt agreements where they cannot pay everything, but also want to avoid declaring bankruptcy. Debt agreements, while not as severe as bankruptcy, are not to be entered into lightly.
Someone should consider a debt agreement only if they have investigated all other options available to them. It’s important that someone entering into an agreement understands the terms, including the severe affect the debt agreement can have on your credit history and your ability to obtain credit.
A debt agreement falls under Part IX of the Bankruptcy Act 1966. Under a Part IX debt agreement, your creditors agree to receive a sum of money that you can afford, over a set period of time, to settle your debts. Once you have paid this money your creditors cannot recover the rest of the money you owe.
This is not the same thing as debt consolidation. It’s important to note that your credit history will be negatively affected, and you are less likely to get loans in the future.
You can get a car loan in spite of the Part IX as long as you are at least 12 months into the agreement, though only with select providers, such as nmoni.
A Part IX debt agreement means that lenders may be more reluctant to provide you with a car loan if you have a Part IX agreement or you may receive higher rates to pay back the loan.
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