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Personal Insolvency/Debt Agreements

Personal Insolvency or Debt Agreements can be made when a debtor and creditor come to a resolution where the individual agrees to pay the debt owed to their creditors partially or in full.

Debt Agreements can only be made if you satisfy a number of conditions.  Some of these are that you are insolvent, have not been bankrupt or used the debt agreement system in the past ten years and have assets and liabilities below a predetermined amount.

Lodging an application with the Australian Financial Security Authority for a debt agreement is an act of bankruptcy, so it is important to seek professional advice before doing so. We can help you to understand if this type of agreement is best for you once we meet and understand your particular circumstances.

A Personal Insolvency Agreement (also known as a Part X Agreement or a PIA) usually is where an offer is made by an individual/s to their creditors in an attempt to resolve their financial difficulties.  If the offer is accepted by creditors, the person is not bankrupt and not bound by the restrictions and responsibilities that a bankrupt person faces.  Normally the offer made is greater than what creditors could expect to receive in the event that the individual became bankrupt and can be funded by the sale of all or some assets, or where the person does not have realisable assets, from future income or funds provided by friends and or relations. 

A PIA is a formal arrangement under the Bankruptcy Act and involves a meeting of the persons creditors to be held.  In order for the offer made to be accepted it requires that  of the creditors who attend the meeting of creditors in person or by proxy, 75% in dollar value and more than 50% in number of those creditors must vote in favour of the proposal.  Some creditors elect to not participate in the meeting or elect to abstain from voting, however even if they choose to do this they will be bound by the decision reached by the creditors in attendance.  A PIA is a good alternative for those people who for whatever reason would prefer not to become bankrupt however wish to resolve their financial difficulties, allowing them to move forward.

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