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PART X PERSONAL INSOLVENCY AGREEMENTS.

Personal Insolvency Agreements : Part X

A Personal Insolvency Agreement (commonly known as a Part X- insolvency agreements are known by Roman numerals as they are part of the bankruptcy Act). This type of agreement is another way of formally coming to agreement with your creditors in relation to your debts.

Eligibility

To be eligible to propose a Part X, you must firstly be insolvent i.e. be unable to pay your debts when and where they fall due.

This type of agreement has no income, asset or debt limits however when a Part X is proposed , the proposal is compared to the bankruptcy alternative and if your income is over a certain level you are required to contribute towards your debts. Current limits are displayed on the ASFA website and adjusted every 6 months in line with CPI.

What can you propose to your creditors?

  • Pay less than the face value of debts to finalise your debts
  • Make a lump sum or pay in instalments (normally from your weekly/fortnightly pay)
  • Sell some property eg an investment property to pay off your creditors
  • Assign some of your assets to your creditors
  • Pay your creditors from the ongoing profits of your business
  • Make different arrangements with different classes of creditors i.e. joint creditors may receive more in a joint proposal compared to a single debtor.

Where do you begin?

  • You must complete a PIA controlling trustee authority nominating your trustee, we have a list of trustees.
  • You need to complete a statement of affairs detailing income, assets, liabilities.

What happens next?

  • The controlling trustee takes control of your assets
  • The trustee calls a meeting of your creditors
  • The trustee investigates your financial affairs

What happens at the creditors meeting?

The creditors meeting is advertised on the ASFA website and YOU MUST attend the meeting. The proposal is accepted by creditors if:

  • A majority of creditors vote YES
  • At least 75% of the creditors who vote

What happens if the creditors vote NO?

They could vote for you becoming bankrupt. You can seek further financial advice from your trustee, or

You can try and resolve your financial affairs outside of a Part X agreement

If the creditors vote YES

A trustee is appointed to carry out the terms of your PART X in accordance with your proposal

Are there fees involved?

Yes there are three types of fees

  • Processing fee
  • Controlling trustee fee
  • Trustee fee

What are your rights?

A creditor cannot bankrupt you if you have put forward a proposal and the others creditors have not had a chance to vote on the proposal. When a PART X is accepted no creditor can take legal action against you for debts disclosed in the PART X nor can they make you bankrupt in respect of these debts.

What are your obligations?

You must co-operate fully with your trustee and disclose any related party debts. You must must your obligations under the PART X, failure to do so will mean that the PART X can be terminated by the trustee, your creditors or a court.

If this happens your debts are reinstated (probably with accrued interest) and your trustee or creditor may apply to the court to make you bankrupt.

What is on the Public Record

Your details are recorded on the NPII forever together with any creditors acceptance of your proposal. In addition your name appears on commercial credit reference record for seven years (Veda Advantage or Dun and Bradstreet being the main ones).