Debt agreement cost estimator

A debt agreement is a legally binding deal with your unsecured creditors under Part IX of the Bankruptcy Act 1966: you pay an agreed amount, usually by regular instalments over up to 3 years (up to 5 years in some cases if you own or are buying your home), and the creditors accept that amount in full settlement. Creditors normally receive less than the full debt, and the administrator takes a share of the money you pay.

Enter the unsecured debts the agreement would cover, the total you would pay as a percentage of those debts (ask the administrator for the total of all payments, including its own fee, then divide by the debts), and any set-up fees you pay outside the instalments.

Formula: total paid = debts × percentage. Debt not repaid = debts − total paid − set-up fees.

Worked example (illustrative): $40,000 of credit card and personal loan debt. The proposal is $780 a month for 36 months, which totals $28,080, or 70.2% of the debts. Entering 70% gives a total of $28,000. With $500 of separate set-up fees, the debt effectively written off is $11,500. Of the $28,000, creditors might receive about $22,400 if the administrator's share were 20%; that split is an assumption, not a standard rate.

Limits: this tool does not show the cost of the credit report listing, the entry on the National Personal Insolvency Index (at least 5 years), or the risk that the agreement fails if payments fall 6 months behind. Compare it with repaying through a hardship arrangement or a counsellor-negotiated plan, and read the debt agreement cost worked example.