Personal Insolvency Agreements (PIA)
A Personal Insolvency Agreement’ (also known as a ‘Part X arrangement’) is an alternative to bankruptcy available under the Corporations Act. A Personal Insolvency Agreement (PIA) is similar to a part 9 Debt Agreement in that to qualify for this arrangement the applicant needs to be insolvent, meaning unable to pay their debts as these fall due.
A PIA offers the applicant the protection of a formally documented legal agreement with his creditors where they agree to accept the applicants “best offer” in full settlement of the applicants debts.
A proposal is put to creditors who then vote on the proposal at a formal meeting of creditors. The distinction between a Part 9 and a Part 10 is in the size of debts and allowable income for the Agreement Applicant.
Most Personal Insolvency Agreements provide for a regular agreed repayment to the applicant’s creditors over a period of 5 years. In most circumstances the applicant will not be required to sell their assets. The maximum creditors can receive is 100% of the current debt.
Like with a Part 9 Debt Agreement, no penalties or further interest will be levied on your debts from the date that an agreement is formalised.
Creditors will be required to vote on your agreement.
Differences Between a Part 9 and a Part 10
The process applicable with a PIA is also somewhat different to a Part 9 Debt Agreement.
- With a Part 10 Your assets will come under the control of a Controlling Trustee.
- Part 9 Debt Agreements are meant for low asset and low income as well as relatively low debt applicants. The Part 10 applicant is able to qualify with fairly high income, assets and debts.
- Controlling Trustee will need to take full control of your assets and liase between you and your creditors
- Your name and some personal details, along with details of the Controlling Trustee and meeting must be advertised in a national and local newspaper.
- The Controlling Trustee is required to perform investigations into your financial affairs (similar to bankruptcy)
- A formal meeting of creditors must be held.
- A detailed report will need to be provided to creditors.
- Part 10 is generally more expensive than a Part 9