June 14, 2024

What is a Personal Insolvency Agreement?

If you find yourself unable to pay your debts when they are due, a Personal Insolvency Agreement is a flexible way to negotiate with creditors and manage your debt.

Entering into a Personal Insolvency Agreement is a serious commitment that carries lasting consequences. While the outcomes are preferable to bankruptcy, it’s important to explore your options with a qualified adviser.

We will discuss Part 10 Personal Insolvency Agreements in greater detail, and help you figure out whether it is the right option for your situation.


What is a Personal Insolvency Agreement?

A Part 10 (Part X) Personal Insolvency Agreement (PIA) is an act of bankruptcy. Under a PIA, you agree to repay some or all of your debts, and can negotiate terms that suit all parties involved. Once the PIA is complete, any remaining debts are extinguished, and you can start life afresh.

Personal Insolvency Agreements are a less drastic measure than bankruptcy. They typically provide better outcomes to creditors and eligible individuals.


Eligibility Criteria for a Personal Insolvency Agreement

You are eligible for a Personal Insolvency Agreement if you are unable to pay your debts when they are due. There are no debt, income or asset limits to be eligible for a PIA.

Generally speaking, a PIA is recommended for individuals who are insolvent, but who are not eligible for a Part 9 Debt Agreement.


What is Covered by a Personal Insolvency Agreement?

A Part 10 Personal Insolvency Agreement is a flexible tool that can be used to find relief from most debts. Below, we have included details about how your PIA will affect common types of debts.


Secured Debts

Secured debts are typically not covered by a PIA.

A secured debt is any debt that is tied to a specific security, such as your car or the family home. Secured creditors retain their right to repossess the property if you are unable to repay the debt.

If you enter into a PIA, your Trustee will contact secured creditors to discuss whether you can continue making payments:

  • If you can make the payments alongside your obligations under the PIA, you are typically able to keep the secured asset.
  • If you cannot make the payments alongside your PIA, you may be able to surrender the secured asset.


Unsecured Debts

Most types of unsecured debts are covered by a PIA. Unsecured debts are any debts that are not tied to a specific property. This includes things like:

  • Credit cards
  • Unsecured personal loans
  • Payday loans
  • Unpaid utilities bills (e.g. water, electricity, phone, internet)
  • Unpaid rent
  • Medical and legal fees
  • Overdrawn bank accounts

Not all types of unsecured debts are covered by a PIA. Your PIA will not include debts like:

  • Child support
  • Spousal maintenance
  • Court-imposed fines
  • HECS-HELP debts


Tax Debts

Debts owed to the Australian Taxation Office can be included in your PIA. Entering into a PIA can be an effective way to negotiate with the ATO and reduce the total amount of your debt.



Higher Education Loan Program (HELP) debts cannot be included in your PIA. You will still be required to repay HECS-HELP debts as normal.


Joint Debts

You can include joint debts in your personal agreement. However, creditors are still entitled to pursue the other person for the full amount of the debt. If you are both included in the PIA, you should both include the joint debt in the agreement.


The Personal Insolvency Agreement Process


1. Appointing a Trustee

The process begins when you appoint a Controlling Trustee to administer your PIA. The Trustee takes control of your financial affairs and assets once they accept the appointment.

At this stage, the Controlling Trustee will lodge the appropriate paperwork with AFSA. A fee is payable to AFSA when your documents are submitted.

Consult a Registered Trustee before making an appointment. A professional Trustee can assess your situation and determine whether a PIA is right for you.


2. Developing a Proposal

During this stage of the process, the Controlling Trustee investigates your finances, assets and debts. They will use this information to develop a proposed Personal Insolvency Agreement.

The agreement will provide details about how and when you will be able to repay your debts, as well as any reductions in the total amount of debt.

The Trustee will call a meeting of the creditors within 25 business days of being appointed. At the meeting, the Trustee will present the proposed PIA, as well as their recommendation as to whether the PIA is in the creditors’ best interests.

Creditors vote to approve the agreement. The agreement proceeds if it is approved by creditors who hold the majority in numbers, and at least 75% of the value of your debt.


3. Administering the Agreement

Your proposal immediately comes into effect if it is accepted by the creditors. The Controlling Trustee (or another Trustee) is nominated to administer the agreement.

During this stage, the Trustee will oversee the terms of the agreement, collect any contributions you make, distribute money to creditors, and report to creditors about the progress of the PIA.


The Outcomes of a Personal Insolvency Agreement

Developing a Personal Insolvency Agreement can have one of two outcomes:


1. Creditors Accept the PIA

Where creditors approve your proposal, you become subject to the terms of the agreement. The Controlling Trustee administers the agreement. The Trustee will ensure all parties meet their obligations. They will also collect and distribute your contributions to creditors. 

The agreement continues until the terms are met. Once discharged from your PIA, any remaining debts (that were included in the PIA) are forgiven, and those debts cease to exist. The agreement may be terminated if you fail to meet your obligations.

Successfully meeting the terms of a PIA allows you to start life afresh.


2. Creditors Reject the PIA

If your creditors reject your PIA, they are permitted to continue debt recovery actions against you. This may include applying to the court to make you bankrupt (if your debt is $10,000 or more).


The Consequences of Personal Insolvency Agreements

Entering into a PIA carries serious, long-term consequences. Consult a registered professional before making any decisions.

Personal insolvency can affect the following aspects of your life:

  • Credit rating – Credit reporting agencies will keep a record of your PIA for a minimum of 5 years. This can have a significant impact on your ability to obtain new lines of credit, such as credit cards, personal loans and mortgages.
  • NPII listing – Your details will be permanently listed on the National Personal Insolvency Index (NPII). The NPII is a publicly-available database that can be searched by anyone for a small fee. Lenders, business partners, employers and landlords may check the NPII, and this can affect your ability to rent a home or obtain credit.
  • Income – You may be required to make regular payments from your income towards your PIA. This can impact your cash flow and short term budget. If you are required to make payments towards your PIA, payments cease when you are discharged from the PIA.
  • Directorship of a company – Individuals who are subject to a Personal Insolvency Agreement are disqualified from acting as the director of a company. Note that you are still permitted to carry on a business such as a sole tradership during the PIA period.

In addition to these consequences, you may also be declared bankrupt if the creditors reject your PIA proposal, or if you fail to meet the obligations set out in the PIA.


How Long Do Personal Insolvency Agreements Last?

There is no time limit to the length of a Personal Insolvency Agreement. If you can repay your debts as a lump sum, the process may only take a few months. If you are required to make regular payments over an extended period, the PIA could last for years.


Develop an Effective Personal Insolvency Agreement With SV Partners

A Personal Insolvency Agreement is an excellent tool for managing insolvency without declaring bankruptcy. Your PIA allows you to discharge most types of debts and find relief from creditors, after which you can continue your life as normal.

Entering into a PIA comes with serious consequences. It’s crucial that you speak with a Registered Trustee at SV Partners before making any decisions.

SV Partners is a team of Registered Trustees and advisers. We have vast experience in managing personal and corporate insolvency matters, so we can provide advice and services to help you navigate your situation.

If you are struggling to repay your debts, contact us today for a confidential consultation.

Are you concerned about your financial position? Contact us now for an obligation free consultation on