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.
You can propose a debt agreement under Part IX of the Bankruptcy Act 1966 if you are insolvent, have not used a formal insolvency option in the last 10 years, and are under three limits that the Australian Financial Security Authority (AFSA) indexes on 20 March and 20 September. 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 for the next 12 months is set by the Act at three-quarters of the debt limit (s 185C(4)(d)); AFSA publishes the dollar figure for the current period on its indexed amounts page. Since the 2018 reforms an agreement can usually last no more than 3 years, or up to 5 years if you own or are buying your home. Check AFSA's indexed amounts page on the day you apply, because the limits change twice a year and AFSA has no discretion to accept a proposal that is over them, even by a dollar.
This guide sits under the overview of debt help options. It is general information only.
The eligibility tests
| Test | Rule (as at 20 September 2026) | How it is measured |
|---|---|---|
| Insolvent | You cannot pay your debts as and when they fall due | Your statement of affairs |
| Unsecured debts | No more than $155,773.80 | Total of provable unsecured debts |
| Divisible property | No more than $311,547.60 | Value of property a trustee could take in a bankruptcy, including home equity |
| After-tax income | No more than three-quarters of the debt limit (AFSA publishes the figure) | Likely income for the 12 months after the proposal |
| Recent history | No bankruptcy, debt agreement or Part X authority in the previous 10 years | AFSA records |
| Affordability | Payments must not cause undue hardship and must fit the payment-to-income rules | Proposal and budget |
All three limits come from one "threshold amount" in s 185C(5) of the Act, which is tied to the same Social Security Act pension rate as the bankruptcy income thresholds: the debt limit is the threshold amount, the property limit twice it and the income limit three-quarters of it. That is why all three move together each March and September. The previous figures (from 20 March 2026) were $150,950.80 for debts, $301,901.60 for property and $113,213.10 for income.
What the 2018 reforms changed
The Bankruptcy Amendment (Debt Agreement Reform) Act 2018 tightened the system from 27 June 2019:
- Maximum term of 3 years, extended to 5 years only where you have an ownership interest in the home you live in (for example you own it or are buying it), so you can keep up mortgage payments.
- Payment-to-income ratio: the proposed payments must not exceed a percentage of your after-tax income set by a ministerial determination. AFSA publishes the current ratio.
- Undue hardship: administrators must certify they believe you can afford the proposed payments.
- Stronger regulation of administrators: registered debt agreement administrators must meet registration conditions and conduct obligations, and AFSA can investigate them and cancel a registration.
The reform package also gave AFSA more powers over proposals that look unaffordable. If an administrator or adviser tells you these rules do not apply to you, ask for the reason in writing and check with AFSA.
How a debt agreement proposal works
- Prepare the proposal with a registered administrator, or yourself if you meet AFSA's conditions. It sets out what you will pay, how often and for how long.
- Lodge it with AFSA with a statement of affairs and any lodgement fee AFSA charges (check the current fee).
- AFSA checks eligibility and writes to your creditors. During the voting period unsecured creditors cannot take action to recover the debts, and interest is effectively frozen for the proposal.
- Creditors vote. The proposal is accepted if a majority by value of the creditors who vote say yes.
- The agreement is made and binds all unsecured creditors, even those who voted no or did not vote.
- You pay the administrator, who distributes to creditors after taking its fee.
- Completion: when every payment is made, you are released from the debts covered.
Lodging the proposal is itself an act of bankruptcy, and your name goes on the National Personal Insolvency Index (NPII) when you lodge, even if creditors later reject it. A proposal that is rejected, withdrawn or lapses is removed from the NPII within a year; an agreement that is made is removed from the NPII after the later of 5 years from when it was made or when it ends (2 years after termination if it fails) (Bankruptcy Regulations 2021 ss 82–83).
What a debt agreement does not cover
- Secured debts such as a home loan or car loan. You keep paying them; if you default the lender can still repossess the security.
- Debts incurred after the proposal.
- Debts that are not provable in bankruptcy, such as some court-imposed fines and child support arrears in most cases.
- Joint borrowers and guarantors: your agreement does not release a co-borrower or guarantor. See joint debts, guarantors and partners.
If you cannot keep up payments
Talk to the administrator straight away. You can ask creditors to vary the agreement (a variation proposal). If payments fall 6 months behind (no payment made on an overdue instalment for 6 months), the administrator must tell AFSA and the agreement is terminated (ss 185LC and 185QA); you then owe the original debts again, less what creditors received, and creditors can resume recovery or petition to make you bankrupt. This is one of the most common failure cases for debt agreements, which is why the affordability test matters. See debt help mistakes to avoid.
Is it the right option?
A debt agreement can suit someone with steady income, unsecured debts they cannot realistically repay in full, and assets (often a car or home equity) they want to keep. It may not suit someone with very low income, because the payments must be sustainable for the whole term, or someone with only small debts that a hardship request or counsellor-negotiated plan could fix without an insolvency record. Compare costs in the debt agreement cost worked example and with the debt agreement cost estimator, and compare with bankruptcy and a personal insolvency agreement.
Frequently asked questions
Can a debt agreement stop wage garnishment or a court case?
Once a proposal is lodged, unsecured creditors generally cannot enforce their debts during the voting period, and if the agreement is made they are bound by it. Existing garnishee orders and court proceedings need specific attention; ask the administrator or a community legal centre.
Do I have to use a paid administrator?
Most debt agreements are run by registered debt agreement administrators, who take a fee from your payments. Check any firm on AFSA's register and compare the total cost. A free financial counsellor can tell you whether a debt agreement is right before you approach one.
Does my partner's income count?
The income limit applies to your own after-tax income. Household costs and a partner's contribution to them are relevant to affordability, and AFSA and the administrator will look at your real budget.
Can I end a debt agreement early?
Yes. You can pay out the remaining amount at any time, and you can apply to terminate it. If terminated without completion, the original debts (less payments made) become payable again.
Sources
- Australian Financial Security Authority — debt agreement eligibility, indexed amounts, registered administrators
- Federal Register of Legislation — Bankruptcy Act 1966 Part IX
- National Debt Helpline — free advice before you sign
- Moneysmart — debt agreements explained
