As an individual or sole trader, you are responsible for your debts. If you have unmanageable debts such as tax, credit cards, personal loans or suppliers from your business activities, you may need consider one of the following alternatives:
Informal Arrangements with your creditors
At Financial Distress Solutions, we have extensive experience negotiating with creditors to achieve a payment arrangement or reduced settlement to avoid a formal insolvency appointment. For further information about Informal Arrangements, click here.
Debt Agreement
A Debt Agreement or Part IX as they are known, is a formal insolvency process where you make an offer to your creditors to pay back a percentage of the debt over a period of time. There are a number of criteria you must satisfy to be eligible to propose a Debt Agreement, such as the value of your debts, assets and income. For further details on Debt Agreements, click here.
Personal Insolvency Agreement
A Personal Insolvency Agreement or PIA as they are known, is a formal insolvency process under Part X of the Bankruptcy Act 1966. Similarly to the Debt Agreement, the process allows you to make an offer to your creditors to pay back some or all of your debts. The PIA process has no eligibility criteria, however they are normally implemented in circumstances where a person’s financial affairs are complex and there may assets available to offer to creditors. For further details on PIA’s, click here.
Bankruptcy
For some people, Bankruptcy may provide the best solution to resolve outstanding and unmanageable debts. Upon becoming bankrupt, all unsecured debts (with a few minor exceptions) are captured by the bankruptcy and the creditor can take no further action against you. This includes the ATO, credit card providers and debt collectors. For further details about Bankruptcy for a sole trader or individual, click here.
The Australian Financial Security Authority has published the “Personal Insolvency Information Booklet for debtors” which can be found at this link
https://www.afsa.gov.au/sites/default/files/forms/personal_insolvency_information_booklet_for_debtors.pdf