Personal Insolvency Agreements

What are Personal Insolvency Agreements?


Personal Insolvency Agreements (‘PIA’) or Part X Agreements as they are commonly known, provide a flexible alternative to bankruptcy. Similarly to the Debt Agreement process, a PIA is a formal agreement between you and your creditors wherein your creditors agree to accept an amount (normally less than the full amount owing) in full and final satisfaction of their debt. The PIA can be structured in any way for example it may be a cash contribution or include the sale of certain assets or a combination of both. Unlike a Debt Agreement, there are no eligibility restrictions (income level and asset/debt level) to propose a PIA. The only requirements are that you must be insolvent and you must be in Australia or have an Australian connection.


The PIA process consists of two parts:


1. The Controlling Trustee period


To proceed with a PIA you need to appoint a Controlling Trustee (‘CT’). The CT’s role is to investigate your financial circumstances and provide a detailed report to your creditors that sets out the likely outcome of your proposal versus if you were to become bankrupt. The CT will also call a meeting of your creditors, at which creditors will vote and either accept or reject the proposal. The CT is required to hold the meeting within 25 working days of being appointed. In order for your proposal to be accepted by creditors, there needs to be a majority in number and 75% in value of those creditors present at the meeting voting in favour. If accepted, the PIA will bind all creditors whether they voted in favour or not. It should be noted that appointing a CT is an act of bankruptcy, so if your proposal is rejected, your creditors may rely on this to make an application to Court to make you bankrupt.


2. The Trustee period


If accepted, your CT normally becomes your Trustee. The Trustee’s role is to administer the terms of your PIA by collecting funds or realizing assets and then making a distribution to your creditors. During the Trustee period you cannot be a director of a company, however other restrictions imposed on a bankrupt (such as overseas travel) do not apply.


If you would like to discuss whether a Personal Insolvency Agreement is suitable for your circumstances, please call us on 1300 747 577 or complete the online enquiry form and we will contact you within 24 hours.