What is a Part X (“Ten”) Personal Insolvency Agreement (PIA)?
A personal insolvency agreement (“PIA”) is a binding arrangement made under Part X (“Part Ten”) of the Bankruptcy Act between you and your creditors, whereby you agree to pay your debts in full or part, by instalments or a lump sum. Unlike a Part IX Debt Agreement, there are no debt, asset or income limits to be eligible to propose a PIA.
What can I propose in a Part X Personal Insolvency Agreement (PIA)?
In most cases, your PIA proposal will provide for a moratorium from your creditor’s claims in exchange for payments over time, usually amounting to a sum less than the full amount that you owe, and possibly including the sale of assets.
Why would I choose a Part X Personal Insolvency Agreement (PIA)?
A Part X Personal Insolvency Agreement (PIA) aims to provide a solution for both you and your creditors. In proposing it, you will be looking for relief from the pressure of your debts, and to avoid the restrictions and personal stigma of bankruptcy. Your creditors will be looking to ensure a controlled distribution of your funds or assets, to receive a higher dividend than they would be likely to in the event of your bankruptcy, and to maintain a source of income.
Who administers a Personal Insolvency Agreement (PIA)?
A registered trustee or the official receiver must be included in your PIA proposal.
What does the trustee of a Personal Insolvency Agreement do?
A PIA is a formal deed executed by you and the controlling trustee, setting out how you will satisfy your debts. The trustee’s obligations and powers are set out in the Bankruptcy Act and will be included in the agreement. In essence, they include the power to enforce the terms of the agreement, to sell any assets, to collect any monies, and to make a distribution to creditors.
How can I begin the Part X PIA process?
You begin by submitting the following documents to the proposed controlling trustee: (1) an authorisation under Section 188 requiring the proposed controlling trustee to call a meeting of creditors and giving control over their assets to the controlling trustee, (2) a Statement of Affairs detailing all of your assets, liabilities and other personal information, and (3) a draft Personal Insolvency Agreement detailing the terms of your proposal. The process begins when the controlling trustee signs a Consent to Act and forwards the appropriate information to the Insolvency & Trustee Service Australia (AFSA) for the assignment of an ‘Estate Number’ and registration on the official record.
How would my a PIA proposal be accepted?
After the controlling trustee has conducted the necessary investigations, a meeting of creditors is called usually within 25 business days after the appointment, where they must decide whether or not to accept your proposal. For your proposal to be accepted, a numerical majority of the creditors and more than 75% in value of creditors that attend must vote in favour of it, resulting in a “special resolution”. If the proposal is not accepted, the creditors may resolve that you should declare yourself bankrupt, but they cannot themselves bankrupt you. Alternatively, creditors may resolve that the debtor be released from the control of the controlling trustee.
Is signing the “Section 188 Authority” an act of bankruptcy?
You must give a “Section 188 Authority” to the controlling trustee to enable the meeting of creditors to be called to consider your PIA proposal. In signing the Section 188 Authority and in the course of making the agreement, you will have committed a number of acts of bankruptcy. In the event that your proposal is not accepted, any creditor may use these acts to apply to the court to have you made bankrupt.
How does a Personal Insolvency Agreement (PIA) affect secured creditors?
Secured creditor’s rights under their securities remain intact. They may exercise their rights regardless of the outcome of the meeting and acceptance of the proposal.
How does a Personal Insolvency Agreement (PIA) affect unsecured creditors?
Unsecured creditors with debts that would be provable in a bankruptcy exchange their right to enforce their claims for a right to share in the proceeds of the PIA. All unsecured creditors are bound by the PIA, whether or not they attended the meeting and/or voted in favour of the arrangement.
Does making a Personal Insolvency Agreement (PIA) affect my property?
Only property that is included in the terms of the PIA is affected. Property that does not form part of the PIA is not available to creditors.
Would making a Personal Insolvency Agreement (PIA) affect my income?
The PIA may include terms that require you to make a contribution out of your income as if you were bankrupt.
What happens if I fail to comply with the PIA?
If you fail to satisfy the terms of a PIA, the agreement will be considered to be in default and a default notice will issued, usually within days. If the default is not rectified, the agreement will be breached and may be terminated by: (1) the terms and provisions of the agreement, automatically, (2) by the trustee after the passing of a consenting resolution at a meeting of creditors, (4) by application to the Court to terminate the PIA and possibly bankrupt you.
Can the PIA trustee pay dividends?
The PIA trustee’s duty is to make distributions in accordance with the terms of the agreement.
When are dividends paid under a PIA?
PIA Payments depend on when funds become available and on the duration of the agreement. If the PIA duration is expected to be fairly short, the trustee will pay dividends when all of assets have been realised and all funds collected. If the PIA is to extend over a longer time, the trustee may make interim distributions as funds become available.
Will making a Personal Insolvency Agreement (PIA) affect my credit rating?
Credit reporting agencies will note the fact that you have signed a Section 188 Authority, however this may be more favourable on your file than the alternative; outstanding writs, defaults and a bankruptcy.
Can I continue under a PIA to act as a Director of a company?
You cannot act as a company director whilst under a PIA, a restriction that will be removed when the agreement has ended.
When does a Personal Insolvency Agreement (PIA) end?
A PIA ends when the terms of the deed have been fully satisfied by the debtor.
What government charges apply to a Personal Insolvency Agreement (PIA)?
The administration of a PIA attracts a government charge, payable at the rate of 3.5% of gross monies received into the estate, less payments to secured creditors and trade on costs. It is payable in priority to any dividend to creditors.
What Is A Part 10 Debt Agreement?
If you and/or your business are seriously struggling financially, it can be very easy to imagine that the only way to relieve yourself of all the stresses and worries associated with your debts is to declare bankruptcy. But it’s always important to remember that declaring bankruptcy is a hugely significant moment in your life, and one which will undoubtedly carry major consequences in the future.
Before declaring yourself bankrupt, be sure you’ve considered all your other options – entering into a Part 10 Debt Agreement, for example. Many people falsely believe that bankruptcy is their only realistic course of action, and so declare themselves bankrupt in spite of all the negative consequences they bring onto themselves. In truth, there are almost always a huge number of options available before bankruptcy even needs to be talked about.
A Part 10 Debt Agreement, also known as a Personal Insolvency Agreement (PIA), is a legally binding agreement that can be drawn up between a debtor and their creditor. The essence of the agreement is this: the debtor agrees to pay back either some or all of their debt to the creditor in the form of either an up-front payment or in instalments.
The amount agreed upon is almost always less than the original debt, and both parties benefit from the exchange – and from knowing that it is protected by law.
By choosing to enter into a Personal Insolvency Agreement, you can save yourself the financial restrictions and the potentially lifelong social stigma associated with declaring bankruptcy, while keeping your creditor happy by providing them with a legal guarantee that they’ll get at least most of the money they’re owed by a certain, officially agreed time.
Choose TurnAround Pros for Help Attaining a Part X Debt Agreement
Here at TurnAround Pros, we’ve established ourselves as one of Australia’s leading specialists in financial and debt management advice. We’ve helped many people overcome severe cases of financial difficulties, and you can rest assured we have the knowledge, skills and experience required to turn your financial troubles around too!
When you come to us for help, we’ll offer you a free, no-obligation consultation with a member of our friendly and professional team. During this time, we’ll seek to gain a thorough understanding of your financial situation, enabling us to better advise you as to the best course of action to take.
Then, if it is established that a Part X Debt Agreement is the best option you have at your disposal, we’ll guide you through every step of the process until you’ve received confirmation from your creditor that they’ve approved your proposal and the threat of bankruptcy has been removed.
We can then work with you to ensure you lay the right, stable financial foundations to allow you to pay off your remaining debt and built towards a rosier financial future.
So if you’re currently experiencing any of the stresses and worries associated with an unstable financial situation or out-of-control debt, be sure that you don’t delay: simply get in touch with a member of our knowledgeable team to arrange your consultation and take the first steps towards a debt-free (and stress-free!) future today!
TurnAround Pros are Queensland’s best professionals for financial distress. If your business is becoming insolvent or you are facing bankruptcy, you are not alone. Work with debt advisors who will help you find alternatives to bankruptcy. Visit our website or call us on 1300 518 070 to learn more.
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