If you are experiencing unmanageable debt and you are contemplating your options – you may consider entering into a Personal Insolvency Agreement (PIA) as an alternative to a debt agreement. A PIA is a formal arrangement with your creditors to settle your debts. A PIA is also known as a Part X Agreement, as Part X in the Bankruptcy Act.
A PIA is similar to a debt agreement in that a proposal for payments is presented to all creditors, but different because the process is more formal.
Depending on the terms negotiated under a PIA, settling debts may involve lump sum payments, ongoing partial payments, transfer of assets or payments arising from sale of assets.
As with all considerations, it is important to seek the advice of an expert who can explain the details of each option and help you choose a solution that is right for you.
The main differences between a PIA and a debt agreement are:
- a Controlling Trustee is appointed to manage the process
- there is no income, asset or debt threshold
- there is no disqualifying period
- the cost to you is higher because the Controlling Trustee is paid a fee and there are administrative, advertising and government charges.
The main similarities between a PIA and a debt agreement are:
- recovery by creditors is frozen while the agreement is finalized (and voted on)
- creditors can’t commence proceedings against you once the agreement is accepted and commenced
- your name and details of the PIA will appear on the National Personal Insolvency Agreements register
- you may have difficulty obtaining credit
- secured creditors are not prevented from repossessing property if you default on loan repayments
Although a PIA means you are not declaring bankruptcy, it does mean you are committing an act of bankruptcy. There are consequences including the debt agreement being recorded in your credit history and note added to the NPII.
If the PIA fails, your creditors may apply to make you bankrupt.
Benefits of a PIA include:
- you make payments to the Trustee (and not individual payments to each creditor)
- you do not declare yourself bankrupt
The process for a PIA works like this:
You authorise a Controlling Trustee to take control of your property. The appointed Trustee must be suitably qualified.
The Trustee will assess the circumstances, draw up a report and then meet with your creditors to negotiate the proposed agreement. Creditors have an opportunity to consider the proposed agreement and vote. Acceptance of a PIA requires the majority or creditors to vote yes.
Once a PIA is in place, all your creditors are bound by the terms of the agreement and cannot commence proceedings to recover debts.
Once a PIA has commenced, you must make the payments as specified under the agreement.
A PIA can be terminated if the Trustee believes that you are not complying, or are unable to comply, with the agreed terms.
A PIA may be varied by you or by your creditors but both parties must agree to the variation.
A debt mediation expert can help you choose a path of action that is right for you. Whether you think that a PIA or a debt agreement will be the right solution for you, or you simply need to talk to someone about your options, then call Debt Agreement Solutions on 1300 653 962.