Personal Insolvency Agreements / Part X Arrangements

A Personal Insolvency Agreement ("PIA") is an alternative to bankruptcy.

In order to avoid bankruptcy, a person who is unable to pay their debts, or who is suffering financial hardship, can put forward a proposal for a PIA. A PIA may take many forms, however, it should generally provide for a better return than that which would be available in bankruptcy.

The benefits of entering into a PIA, may include:

• Avoiding bankruptcy, which lasts for at least three years.
• Certain assets not being sold, which would otherwise be sold in bankruptcy.
• Some of the restrictions placed upon a bankrupt not applying, including restrictions relating to travel, trading businesses and incurring debts.
• There is no requirement to pay income contributions under a PIA, which may be required to be paid in bankruptcy.

A proposal for a PIA can take many forms, however, it is common that the proposal will provide for the sale of certain assets which a person owns, in addition to the person paying an additional amount in a lump sum or over time. If payment is made by way of a lump sum, such funds are commonly sourced from a friend or relative of the person proposing the PIA.

In order to put forward a proposal for a PIA a person must appoint a Controlling Trustee who will review the person’s circumstances and provide a report to the person’s creditors, which will include a recommendation as to whether or not creditors should accept the proposal for a PIA. The Controlling Trustee will then convene a meeting of creditors at which creditors will vote on the PIA proposal. If the PIA proposal is accepted by creditors the agreement will be binding on all unsecured creditors, whether or not they voted for or against the proposal.

If you are seeking advice regarding the possibility of putting forward a proposal for a PIA, please contact our Brisbane or Gold Coast office and our experienced staff will be able to assist you.