Managing personal insolvency can be a challenge. No matter the size of your debts, dealing with creditors and struggling to make repayments is both stressful and time-consuming. To help manage your finances, Australian legislation provides two types of personal insolvency arrangements that allow you to repay and be released from debts without needing to declare bankruptcy.
A Part 9 debt agreement (IX) and Part 10 debt agreement (X) are two ways of handling your debts that allow you to find relief from creditors and start your life afresh. While the two arrangements offer similar benefits, they’re only viable for people who seek assistance early on. In this article, we will discuss the eligibility requirements and explore each arrangement in more detail.
What is a Part IX Debt Agreement?
A Part IX (Part 9), also known as a debt agreement, is a binding arrangement between you and your creditors. A debt agreement allows you to settle your debts without becoming bankrupt.
Debt agreements are reserved for people who meet the following eligibility criteria:
- You must be unable to pay your debts on time
- Your debts must be below a maximum threshold
- Your assets must be below a maximum threshold
- Your income must be below a maximum threshold
- You cannot have been bankrupt or had a Part IX or Part X agreement in the last 10 years
Debt agreements are overseen by an administrator who helps to draft, lodge and manage the agreement. Once a Part IX agreement is approved by AFSA and the majority of your creditors, you make regular payments to the administrator, and the administrator handles distributing the money to creditors.
What is a Part X Debt Agreement?
Also known as a Personal Insolvency Agreement (PIA), a Part X (Part 10) is a legally binding agreement made between you and your creditors. Reaching a Part X agreement will allow you to settle your debts without becoming bankrupt.
Your Part X debt agreement will be drafted as a form of Deed, and it records certain details, including:
- Property of the debtor that is available to discharge debts
- How the property will be dealt with
- Any income that’s available to discharge debts
- The conditions of the Agreement
- Which debts the debtor will be released from
- Specifying whether prior transactions can be pursued by the Trustee
- Nominating a Registered Trustee to administer proceedings
There are no debt, asset or income limits to be eligible for a Part X agreement, and you may be able to retain some of your assets (such as your houses and cars) under the agreement.
When are Part IX and Part X Agreements Used?
As a formal way of managing personal insolvency concerns, Part IX and Part X agreements are generally considered the final steps before bankruptcy. As bankruptcy has several major, ongoing consequences, reaching an agreement minimises the impact on your life.
Formalising your agreement under Part IX or Part X legislation allows for it to be administered by a Trustee and prevents creditors from commencing further debt recovery actions until the agreement is resolved.
There are a number of circumstances that can lead you to seek a Part IX or Part X agreement, including situations where you:
- Are unable to pay all your debts
- Receive letters of demand
- Receive writs or bankruptcy notices from creditors or debt collectors
- Have provided personal guarantees against company debts that are called up
For creditors, Part IX and Part X agreements allow them to recover more of their money than if they were to make you bankrupt. This improves outcomes for both you and your creditors.
Are You Experiencing Financial Difficulties? Talk to SV Partners Today
Financial struggles are an unfortunate fact of life for most of us. If you feel your debts are getting out of hand, it’s important to act early and seek help from qualified professionals. Part X agreements allow you to avoid the ongoing impacts of bankruptcy proceedings, but they are only viable arrangements when explored early.
As a Registered Trustee with years of experience in helping both individuals and corporate clients through financial strain, SV Partners can provide the advice and support you need. Our experienced team will walk you through all your available options, helping you decide whether personal insolvency agreement is the right choice for you.
Contact us today to make an appointment, or call us on 1800 246 801 to arrange a confidential consultation.