DEBT AGREEMENTS AND THE SELF EMPLOYED
Being self-employed does not exclude you from using a Debt Agreement to address your debts and become debt free.
In fact, Debt Agreements were originally introduced into the Bankruptcy Act 1966 to help struggling businessmen, particularly sole traders, deal with their unsecured debts without the need to enter Bankruptcy.
Since then, Debt Agreements have helped thousands of self-employed sole traders. They have saved businesses, and avoided Bankruptcy becoming debt free as a result.
How Can A Debt Agreement Help the Self Employed?
A Debt Agreement provides self-employed people with an opportunity to reach a new and balanced agreement with all of their unsecured creditors, whilst enabling them to continue trading and avoid Bankruptcy.
Usually based on a 5 year term, the Debt Agreement offers creditors regular repayments which are based on levels of affordability rather than contractual obligations. A Debt Agreement is drafted, to highlight to creditors what financial return they will be provided through the Debt Agreement in comparison to the projected outcome from bankruptcy proceedings.
Creditors are asked to cast a vote as to whether they accept the proposal and if 50% or more of the creditors agree to accept the Debt Agreement it becomes legally binding on all of the creditors.
A Debt Agreement can only be proposed through and administered by a licensed Debt Agreement Practitioner. It takes approximately 2-4 weeks to set up and then a statutory 5 week voting process. Call 1300 912 197 for more information on how a Debt Agreement works.
What about trade creditors?
A Debt Agreement deals specifically with unsecured creditors and it treats all unsecured creditors equally.
As a result, all personal debts must be included into, and be bound by, the Debt Agreement.
For a sole trader this includes all unsecured trade accounts and business loans, business credit card debts as well as bank overdrafts. Any other personal debts, like store cards, catalogues and credit cards are also included.
This can cause some embarrassment for some traders, as they will be unable to maintain multiple trade accounts.
Am I allowed any trade credit?
It is unlikely that you will be able to receive trade credit during the Debt Agreement if the supplier does a check on your credit file as the Debt Agreement is noted there for the duration of the Debt Agreement term. There are no restrictions on getting further trade credit but you must be aware of your obligations under a Debt Agreement Self restraint will be expected to be shown on the account and levels of credit will most likely be modest. The account should be used solely to fund client's works and the credit will be expected to be cleared within a reasonable time.
If you would like to discuss this point with an adviser please call 1300 912 197
Keep trading through
Traders can use a Debt Agreement to help keep their creditors at bay, thus removing the crippling costs of debt that can strangle a small business.
Business conditions have been very difficult in recent times. When trade is slow and the costs of running the business keep mounting, a Debt Agreement can offer the perfect respite from creditors demands.
Get Professional Debt Agreement Advice
If you're self employed and considering whether entering a Debt Agreement is the right thing to do, please call 1300 912 197 where one of the team is waiting to talk to you right now.
Debt Savvy are professional Debt Agreement Specialists. Our aim is to help people who are struggling with debt come to understand how a debt solution could be applied to their personal circumstances.
All our consultations are free, you're not obliged to follow our advice and our conversation will be held in the strictest confidence.
To arrange a call with one of the team, simply complete this form and someone will call you at your preferred time.