Personal Insolvency Option

An Informal Debt Arrangement

An informal debt arrangement is a private deal you negotiate directly with your creditors. It sits outside formal insolvency law, off any public register, on terms you can actually afford. It is the least formal option there is, and the least secure. It is worth understanding why before you rely on it.

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Understanding Informal Arrangements

What an informal debt arrangement actually is

An informal debt arrangement is a private agreement with the people you owe: reduced repayments for a period, a pause on debt repayments, interest frozen, or a debt settled in full and final for a reduced lump sum. It can cover credit cards, personal loans, utility bills, council rates and trade accounts. Because it isn't made under the Bankruptcy Act 1966, it isn't a formal insolvency, and nothing about it appears on the National Personal Insolvency Index or any other public register.

That privacy is the appeal, and for some people it is more than a preference: bankruptcy restricts overseas travel and affects certain professions, whereas an informal arrangement does neither. Here is the catch, and it matters more than anything else on this page: an informal arrangement is not legally binding. A creditor who agrees today can withdraw tomorrow and resume recovery. If they already hold a court judgment against you, they can apply for a bankruptcy notice. And they aren't bound at all if they weren't part of the deal.

That doesn't make it the wrong choice. It holds only while your creditors choose to hold it, and that is the thing to weigh before you rely on it.

The essentials
What it is
A private deal with your creditors to vary what you pay, or settle for less, negotiated outside the Act.
Who it suits
A manageable shortfall on unsecured debts, creditors willing to cooperate, and something realistic to put on the table.
Is it binding?
No. It holds while each creditor sticks to it, and never binds a creditor who wasn’t part of it.
Does it go on a register?
No. Nothing on the public insolvency register. Your credit file is a separate matter, covered below.
Your options

Three ways an informal approach can work

01

A varied repayment or hardship arrangement

Change the terms of the debt, not the amount you owe.

Rather than settling the debt, you vary its terms for a period: reduced repayments, a short payment holiday, frozen interest or late fees, and the spread of arrears across the remaining term. Where the creditor is a credit provider, this is handled under the hardship provisions as a financial hardship arrangement. That is worth knowing, because those are reported to the credit reporting bodies.

02

A full and final lump-sum settlement

Settle for less than the balance, in one payment.

You offer a single payment, often from family, a redraw or the sale of an asset, and the creditor writes off the rest. A creditor comparing a realistic offer against what they would actually recover from a bankruptcy is making a commercial decision, not a moral one, and that is the basis on which these are won. Get the acceptance in writing before you pay anything.

03

Temporary debt protection

Twenty-one days in which unsecured creditors must stop.

Not informal at all: a formal 21-day protection under the Bankruptcy Act that stops unsecured creditors taking enforcement action while you get advice, and like an informal arrangement it is not recorded on the National Personal Insolvency Index. It buys room to negotiate rather than negotiating against a deadline. Applying for it is itself an act of bankruptcy that a creditor can use to petition the court, so take advice before you use it.

Where your financial situation makes informal the wrong answer

Informal agreements stop working when the shortfall is structural rather than temporary. If the debt is genuinely unmanageable debt, if one creditor keeps escalating whatever you offer, or if servicing an arrangement leaves you nothing to live on, we will say so and take you through the formal insolvency options instead.

The consequences of bankruptcy

What an informal arrangement gives you, and what it doesn't

Three of these are real advantages over every formal option. The fourth is why we always walk you through the alternatives too.

Nothing on the public register

Unlike formal agreements, this isn’t a formal insolvency, so it isn’t recorded on the NPII or any other public insolvency register.

Your assets, and your control

No trustee is appointed, and no property changes hands. You keep what you own and keep deciding what happens next.

The quickest option to arrange

Nothing to lodge, no statutory process, no creditor vote. It moves as fast as your creditors reply.

Your creditors keep every right they had

The trade-off. Agreeing costs a creditor nothing legally: they can withdraw and still take recovery action.

Common Questions

What people ask us first

If yours isn't here, just ask on your first call.

Is a debt agreement and an informal arrangement the same thing?+
They aren’t, and it’s the most expensive mix-up in personal insolvency. “Debt agreement” is the statutory name for a Part IX agreement under the Bankruptcy Act 1966: binding on your creditors once accepted, recorded on the NPII, limited by income, asset and debt thresholds set by the Act, only open to you if you’re insolvent, and proposing one is an act of bankruptcy. An informal arrangement is none of those things. So if you see an “informal debt agreement”, that’s cause for concern.
Should I talk to a free financial counsellor first?+
Often, yes. For smaller debts or a temporary cash-flow problem that is the right first call, and the National Debt Helpline on 1800 007 007 will put you in touch with a financial counsellor at no charge. Where the debts are larger, or property or a business is involved, you will need a registered trustee as well, but the two are not alternatives, and free advice first costs you nothing.
How is an informal arrangement different from debt consolidation or a personal loan?+
Debt consolidation and personal loans replace your debts with a new debt, usually one larger loan at a single rate. You still owe the full amount, and if the loan is secured against your home, you have converted unsecured debt into secured debt, which is a significant step backwards if things get worse. An informal arrangement does the opposite: it changes what you pay on the debts you already have, or settles them for less, without borrowing anything. Neither is better in the abstract. Consolidation can work where the problem is the interest rate. It rarely works where the problem is the size of the debt.
Does an informal debt arrangement affect my credit file?+
It can. An informal arrangement isn’t recorded on the NPII, but your credit report is separate. Since 1 July 2022, if the creditor is a credit provider and the arrangement is one of the financial hardship arrangements covered by the rules, the provider must report it. That financial hardship information remains on your repayment history for 12 months and can’t be used in credit scoring, but it is visible to a lender reviewing your credit history. Defaults already listed stay listed, and a judgment entered before you negotiated stays publicly searchable.
What happens if a creditor agrees and then breaks the arrangement?+
Legally, not much, and that’s the central weakness of the informal route. It isn’t legally binding, so a creditor who withdraws leaves you with nothing to enforce, and they can resume recovery efforts. If they hold a court judgment against you, they can also apply for a bankruptcy notice. Without a judgment, they would have to sue you first. Your written record still helps, but it isn’t an enforceable right.
What’s the difference between an informal arrangement and a Part IX debt agreement?+
They’re fundamentally different despite the similar names. A Part IX debt agreement is a formal insolvency under the Act: accepted on a majority in value of the creditors who reply, it then binds all the creditors it covers; it’s recorded on the NPII and removed after a set period, generally at least five years; it requires you to be insolvent; it carries income, asset and debt limits set by the Act; and proposing one is an act of bankruptcy. An informal arrangement is none of that. You’re trading enforceability for privacy.
What is temporary debt protection?+
A formal 21-day protection under the Act that stops unsecured creditors taking enforcement action against you while you get advice. It isn’t recorded on the NPII, and it isn’t a solution on its own. It’s a deliberate pause so you can decide rather than have a decision forced on you. Know the limits before you use it: it covers unsecured creditors only, it doesn’t cover government debts such as child support, student loans or court fines, it stops enforcement rather than creditor contact or court action, applying is itself an act of bankruptcy that a creditor could use to apply to make you bankrupt, and you cannot apply again for 12 months. Worth a conversation first.
What are my rights if I am experiencing financial hardship?+
Credit providers do have to respond. Under the National Credit Code, you can give a hardship notice verbally or in writing, and a bank, lender, or card issuer must respond within 21 days. ASIC enforces that duty and has acted against major lenders for failing it, and you can take a refusal to AFCA at no cost. So you have a statutory right to ask, and they have a statutory duty to answer. What you do not get is a binding outcome. That part is still a matter of agreement.
When should I stop trying informally and consider a formal debt agreement?+
When the arrangement has already broken down once, when a creditor keeps escalating regardless, when a bankruptcy notice arrives, or when servicing it leaves you nothing to live on. A formal debt agreement or a personal insolvency agreement gives you what an informal arrangement never can, which is creditors bound whether they like it or not. Bankruptcy gives you a definite end.
Why Rapsey Griffiths

Real people, on your side, when it matters most

At Rapsey Griffiths, you'll deal with the people whose name is on the door: Mitch Griffiths and Chad Rapsey, Founders. Between them, Mitch and Chad bring decades of experience in restructuring and personal insolvency, and a calm, straight-talking approach that helps people understand exactly where they stand.

Plenty of places will tell you an informal arrangement is the easy way out of financial stress. The first thing we do is tell you whether an arrangement will actually hold. How many creditors are involved, how far any of them have gone, what you can genuinely afford, and whether the shortfall is temporary or structural. From there we help you structure a realistic offer, get it in writing so there is no argument later about what was agreed, and keep things moving.

Mitch Griffiths and Chad Rapsey, Registered Trustees in Bankruptcy
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