Debt Options, Thresholds and 2026 Rules
How hardship arrangements, Part IX debt agreements, Part X personal insolvency agreements and bankruptcy work in Australia, with the AFSA thresholds that apply in 2026.
debt agreement vs bankruptcy Australia
Behind on debts? Compare hardship, debt agreements and bankruptcy before you sign anything
Most Australians who are struggling with debt have more options than the advertisements suggest. These guides explain each step from a hardship request to bankruptcy, the AFSA thresholds that apply from 20 September 2026, what each option does to your credit report, and where to get free help.
- Start with the free options: hardship requests under the National Credit Code and the National Debt Helpline (1800 007 007)
- Check debt agreement and bankruptcy thresholds, income contributions and protected assets with worked examples
- Avoid costly debt management firms, know your rights with debt collectors and how to complain to AFCA
Start hereBankruptcy income contribution estimator (AFSA thresholds from 20 September 2026)
Explore by topic
Worked Examples and Checklists
Decision checklists and illustrative calculations: debt agreement costs, bankruptcy contributions, hardship variations, credit report timelines and limitation periods.
Mistakes, Failure Cases and Official Sources
Where people in debt get caught out: fee-charging debt firms, collector pressure, ignored bankruptcy notices and missed complaint rights, plus the free official help available.
Start here
Debt Options, Thresholds and 2026 Rules
How bankruptcy works in Australia: 3 years and 1 day, trustees, travel and what it affects
How personal bankruptcy works in Australia in 2026, from applying through AFSA to discharge after 3 years and 1 day, debts released and not released, travel, credit and jobs.
Worked Examples and Checklists
How much does a debt agreement cost? A worked example against repaying in full
An illustrative Australian debt agreement costed line by line, with administrator fees, what creditors receive, and comparisons with repaying in full, a frozen-interest plan and bankruptcy.
Debt Options, Thresholds and 2026 Rules
Debt agreement eligibility 2026: Part IX income, debt and asset limits and the 3-year rule
Who can propose a debt agreement under Part IX of the Bankruptcy Act in 2026, AFSA's indexed limits from 20 September 2026, the 3-year term rule and what happens next.
Mistakes, Failure Cases and Official Sources
Debt help mistakes to avoid in Australia: 12 failure cases and what to do instead
The most common and costly mistakes Australians make when dealing with debt, from paying debt firms and unaffordable debt agreements to ignoring bankruptcy notices, with what to do instead.
Debt Options, Thresholds and 2026 Rules
Debt help options in Australia: from hardship requests to debt agreements and bankruptcy
The full ladder of debt options in Australia in 2026, from free hardship requests and financial counselling to Part IX debt agreements, Part X agreements and bankruptcy.
Worked Examples and Checklists
Debt agreement or bankruptcy? A decision checklist with three worked households
A step-by-step checklist for choosing between hardship, an informal plan, a debt agreement, a Part X agreement and bankruptcy in Australia, with three illustrative households.
Tools
Bankruptcy income contribution estimator (AFSA thresholds from 20 September 2026)
Estimate the yearly income contribution a bankrupt may have to pay: half of assessed after-tax income above the threshold for the household's number of dependants.
Debt agreement cost estimator
Estimate what a Part IX debt agreement would cost you in total, including the administrator's share and set-up fees, compared with the debts it covers.
Repayment plan calculator (hardship variation or informal arrangement)
Work out the regular repayment needed to clear a debt over a chosen period at a given interest rate, for example a frozen-interest payment plan or a hardship term extension.
Checklist before choosing a debt agreement, PIA or bankruptcy
Questions, documents and free checks to work through before you sign any formal debt option or pay a debt help firm.
Debt options in Australia compared
| Option | How it works | Can suit | Watch out for |
|---|---|---|---|
| Hardship variation (National Credit Code s 72) | You tell a lender you cannot meet repayments; it must respond within set timeframes and may extend, pause or reduce repayments | A temporary drop in income with a realistic recovery | Interest usually keeps running; hardship information can show on your credit report for 1 year |
| Informal payment plan or settlement | You or a financial counsellor negotiate directly with each creditor, sometimes with interest frozen or a lump-sum discount | Manageable debts, or a lump sum from family, super release or an asset sale | Get every agreement in writing; creditors do not have to agree |
| Debt consolidation loan | A new loan pays out several debts at a lower rate | Good credit and a genuinely lower total cost | Longer terms raise total interest; the old cards must be closed |
| Debt agreement (Part IX) | Binding agreement with unsecured creditors to pay an affordable amount, normally over up to 3 years, through an administrator | Insolvent people under AFSA's debt, asset and income limits who can pay something regularly | Act of bankruptcy, NPII record for at least 5 years, credit report listing; fails if 6 months in arrears |
Frequently asked questions
What is the difference between a debt agreement and bankruptcy?
A debt agreement under Part IX of the Bankruptcy Act is a binding deal in which your unsecured creditors accept an amount you can afford, usually paid over up to 3 years; you keep your assets but must be under AFSA's debt, asset and income limits. Bankruptcy has no limits, but a trustee can sell divisible assets and you may pay income contributions; it normally ends 3 years and 1 day after you file. Both are recorded on the National Personal Insolvency Index: a bankruptcy with no removal date, a debt agreement for at least 5 years.
What are the debt agreement limits in 2026?
For the period from 20 September 2026 AFSA lists an unsecured debt limit of $155,773.80 and a divisible property limit of $311,547.60. The after-tax income limit is three-quarters of the debt limit; AFSA publishes the dollar figure. The figures change on 20 March and 20 September, so check AFSA's indexed amounts before you apply. See the debt agreement thresholds guide.
How long does bankruptcy last in Australia?
Bankruptcy normally ends automatically 3 years and 1 day after your statement of affairs is filed. The trustee can lodge an objection to discharge that extends it to 5 or 8 years. Proposals to cut the standard period to 1 year were introduced in 2017 but did not become law.
Will I lose my house or car if I go bankrupt?
Your interest in a home normally vests in the trustee, who can sell it unless the equity is bought back or is negligible. You can usually keep household items, tools of trade and one or more vehicles up to indexed value limits, and money in regulated super funds is generally protected. See protected assets in bankruptcy.
How long does a debt agreement or bankruptcy stay on my credit report?
According to the OAIC, bankruptcy stays for the later of 5 years from when you became bankrupt or 2 years after it ends; a debt agreement stays for the later of 5 years from when it was made or 2 years after it ends. On the National Personal Insolvency Index a bankruptcy stays with no removal date, while a debt agreement is removed after the later of 5 years from when it was made or when it ends (2 years after termination).
Should I pay a company that advertises debt solutions?
Be careful. Free financial counsellors do the same negotiation work at no cost and do not earn a share of a debt agreement. Firms that provide debt management services generally need an Australian credit licence, and debt agreement administrators must be registered with AFSA. Check both registers before paying anything. See warning signs of dodgy debt firms.
What can I do about harassment by a debt collector?
The ACCC and ASIC Debt collection guideline sets out what collectors should and should not do, including limits on how often they contact you. You can ask for communication in writing, dispute the debt, complain to the collector and then to AFCA if it is a member. See debt collectors and your rights.
How this site is made
Arrears to Answers is an independent information project. Guides are drafted with the help of AI writing tools and checked against official and primary sources before publication; see our Editorial Policy. We are not affiliated with any provider mentioned on the site and do not sell products or services.