Personal Insolvency Agreement

A Personal Insolvency Agreement (also known as Part X or Part 10) is a legally binding agreement between a debtor and creditors to satisfy their debts. In Australia, Personal Insolvency Agreements are regulated by the Bankruptcy Act 1966.

Personal Insolvency Agreements are one of two agreement options, the second type being a Debt Agreement. For debtors whose assets and liabilities are considered too great for a Debt Agreement, a Personal Insolvency Agreement can be a feasible way to settle their debts without declaring bankruptcy.

Personal Insolvency Agreements provide a high degree of flexibility for individuals to negotiate with their creditors. The Agreement between debtor and creditors is administered by a Registered Trustee. These arrangements carry insolvency consequences that are important for the debtor to understand prior to entering into an Agreement. Personal Insolvency Agreements are an alternative to bankruptcy and can be a suitable option if debtors seek legal advice early.

What causes a Personal Insolvency Agreement?

There are a variety of circumstances that can lead to debtors entering into a Personal Insolvency Agreement. For example, situations where individuals cannot pay all their debts or where they receive letters of demand, writs or bankruptcy notices from creditors, debt collectors or solicitors could all result in a Personal Insolvency Agreement. Likewise, an Agreement may be required where an individual’s personal guarantees provided against company debts are called up.

A Personal Insolvency Agreement is the final step before bankruptcy and occurs where an individual is ineligible for a Debt Agreement (also known as a Part IX or Part 9).

What are the expected outcomes of a Personal Insolvency Agreement?

The primary goal of a Personal Insolvency Agreement is to relieve individual debtors from debt problems and to extinguish their existing debts. These arrangements are favourable for both debtors and creditors, with creditors often receiving greater dividends more quickly than under bankruptcy proceedings. The Agreement is binding between all parties, however, the arrangement is designed to be flexible to allow each party to achieve a satisfactory outcome.

By appointing a Registered Trustee to administer a Personal Insolvency Agreement, creditors are unable to continue or commence further debt recovery actions until the creditors determine whether to execute the Personal Insolvency Agreement. Following investigations by the Registered Trustee into the debtor’s circumstances and the terms of the Agreement, creditors must vote on the proposed Personal Insolvency Agreement.

If the Personal Insolvency Agreement is executed, the debtor can avoid restrictions from bankruptcy and the impact on their credit rating is less severe. This allows debtors to start life afresh, free of debt.

Personal Insolvency Agreements are drafted as a form of Deed which must specify certain items, including:

  • Properties of the debtor that are available to discharge their debts
  • How the properties will be dealt with
  • Any debtor income that is available to discharge their debts
  • The conditions under which the Agreement is to take effect, and any conditions under which the Agreement terminates
  • The extent to which the debtor is released from their debts
  • Specifying whether the Registered Trustee can pursue antecedent transactions
  • Nominating a Registered Trustee to administer the agreement

How can SV Partners help?

In order for a debtor to propose a Personal Insolvency Agreement, they must appoint a Registered Trustee, such as SV Partners. Once SV Partners is appointed, we conduct our investigations, report to creditors on your behalf and structure a proposal that is beneficial to all parties involved.

SV Partners will guide you through the process, providing support every step along the way of administering your Personal Insolvency Agreement. Our services are designed to alleviate the pressures you may be facing from creditors.

For more information about Personal Insolvency Agreements or Personal Bankruptcy support, visit our FAQ section. Alternatively, to discuss your situation and see how our team can help, contact us on our confidential assist line on 1800 246 801 for an obligation free consultation.