Personal Insolvency Agreements

Have you got more than $106,561 in unaffordable debt and need to find a debt solution?

We can help you combine all unsecured debt into a formal repayment arrangement (subject to strict criteria and creditor approval).

Call Us today to see if you qualify.

Personal Insolvency Agreement Video Library

Personal Insolvency Agreement criteria:

  • You are considered insolvent (unable to pay your debts as and when they fall due); and
  • Have unsecured debts more than > $106,561; or
  • Have equity in assets more than > $106,561; or
  • Regularly employed but annual income is more than > $79,920.75 or approximately > $111,321 (before tax for Australian residents)

The benefits of a PIA include:

  • Affordable regular payments tailored to your budget;
  • Unpaid debt will be legally written off (including interest);
  • Binds all creditors into the agreement (once accepted);
  • Fixed payment period usually from 3 to 5 years;
  • We deal with all creditor calls and correspondence;
  • Avoids the stigma of formal bankruptcy – allowing you to enjoy the following benefits:
    • Freedom to travel overseas
    • Assets will be protected

What is a Personal Insolvency Agreement?

A PIA is a legally binding agreement with your creditors which must first be approved by them. Usually a PIA is structured so you pay an agreed regular sum for a period of 3 to 5 years. The interest on your debts is frozen at the time your PIA is accepted by your creditors.

How does a Personal Insolvency Agreement work?

Your PIA will be established to assist you to regain control of your finances- it will be structured and developed to suit your particular circumstances. Your contributions are divided up between your creditors (less our fee which is approved by your creditors), who accept the sum in full and final settlement of the amount you owe them. In many cases this will be less than the total amount you currently owe and any difference will be written off if you complete your PIA. If you own your home or other assets you may choose to sell them or re-mortgage these assets and pay one lump sum in full and final settlement under your PIA.

Once you sign a 188 Authority (which commences the process for a PIA), your creditors will not be able to take any enforcement action against you whilst the PIA is kept up to date.

So how much will I be required to pay under a Personal Insolvency Agreement?

The regular payments you make under your PIA will depend on your income and expenditure and your assets and liability position. We will help you assess what you can comfortably afford to repay towards your PIA.

Is a Personal Insolvency Agreement (PIA) the same as a Part X agreement?

Yes – A PIA is administered under Part X of the Bankruptcy Act, so a PIA can also be be referred to as a Part X arrangement.

What type of people enter into Personal Insolvency Agreements?

Usually people who exceed the statutory thresholds for a Debt Agreement will apply for a PIA. If you exceed the following thresholds you will not be able to propose a Debt Agreement and will need to consider a PIA.

  • Unsecured creditors more than $106,561; or
  • Assets more than $106,561; or
  • Income more than $79,920.75 (after tax) or approximately $111,321 (before tax for Australian residents)

Are there any other options apart from a Personal Insolvency Agreement?

You could approach your creditors individually and ask them to reschedule your debts, but this may be difficult if you have a lot of creditors. Some banks and building societies have hardship assistance and we recommend that you approach them in the first instance before proposing a PIA.

Bear in mind that unlike a PIA, an informal arrangement offers no guarantees as one or more of your creditors could change their mind at a later date, or charge you higher rates of interest.

What are the advantages of a Personal Insolvency Agreement?

  • We help you to calculate what you can afford to repay and you make just one regular payment under your Personal Insolvency Agreement to your client account by a regular direct debit.
  • Once your PIA is approved, all of your creditors are legally bound by its terms, so as long as you keep paying your agreed sums you will be protected from any creditor enforcement action.
  • Once the agreed term of your PIA is over (usually after 3 to 5 years) you will have no further obligations to your creditors. At this point you will stop paying the regular sum, and you will then be on the road to financial freedom.
  • Your employment will probably not be affected. In fact, your employer will not know about your PIA unless you choose to tell them.

What is the difference between a Debt Agreement and a Personal Insolvency Agreement?

  • If you exceed the Debt Agreement Thresholds you cannot propose a Debt Agreement and can only propose a PIA if you wish to formally deal with your debts under the Bankruptcy Act.
  • You must appoint a Controlling Trustee to initiate the process for a PIA. The 188 Authority is irrevocable and is an Act of Bankruptcy, which means if your proposal for a PIA is rejected your creditors will be able to rely on the Act of Bankruptcy and petition for your bankruptcy. For that reason it is important that you put forward your best possible PIA.
  • You must supply your Controlling Trustee with at least 6 months of bank statements. Your Controlling Trustee will examine the statements and report any possible recoveries to your creditors. Your PIA can exclude the recovery of any voidable transactions like a Preference Payments or Transaction to Defeat Creditors.
  • Your Controlling Trustee will call a meeting of creditors which you will need to attend. The meeting will be advertised on the AFSA web site.
  • The Controlling Trustee will prepare a report to creditors and must form a recommendation as to whether your PIA proposal will provide creditors with a better return compared to bankruptcy. The report will be issued to creditors when the Controlling Trustee calls the meeting of creditors.
  • If your PIA is accepted by your creditors a Registered Trustee with AFSA must supervise the PIA. It will be the role of the Registered Trustee to pay dividends to your creditors from the contributions you make towards the PIA.

How do I apply for a Personal Insolvency Agreement?

The first step is to call us on our toll free advice line or to apply on-line. We will take you through our Best Advice Model and will then advise you on the solution which best suits your financial circumstances. After you have supplied us with all of the necessary information we will prepare your PIA for you.

After you have signed your PIA we will lodge it with AFSA. We will then prepare a report to your creditors and call a meeting of creditors so your creditors can vote on your proposal. You will need to attend your meeting of creditors and answer any questions put to you by your creditors.

Will a Personal Insolvency Agreement affect my credit rating?

Your PIA will be recorded on the National Personal Insolvency Index register (forever). This register is maintained by AFSA. Your name will also be recorded on a commercial credit reference database for a minimum of 5 years, after which time it will be deleted. Your credit is likely to be effected after entering into a PIA or you may be charged a higher rate of interest.

What else should I know before I apply for a Personal Insolvency Agreement?

You might actually pay more under a PIA compared to if you were made Bankrupt. To enquire if you would be liable to make compulsory income contributions under bankruptcy please complete the information on the Bankruptcy Income Contribution Calculator.

Signing the 188 Authority is a serious step and you should know that signing the 188 Authority is an Act of Bankruptcy, which means if your proposal is not accepted by your creditors, then they may rely upon that event which will assist with any application to make you bankrupt. For that reason it is important that you put forward your best possible proposal.

Once signed the 188 Authority is signed it is irrevocable and cannot be reversed.
We recommend that you should visit the web site published by AFSA which has very detailed information on the process of establishing a PIA. You also need to read the Prescribed Information Booklet (Download 365Kb) and sign an acknowledgement that you have read and understood it. This booklet is published by the Australian Financial Security Authority (AFSA) and must be signed before the process for a Personal Insolvency Agreement can be initiated.

Will my home be safe in a Personal Insolvency Agreement?

You will not usually have to sell your property if your creditors accept your PIA (but you may need to release some equity from the property). If you choose to keep your house, you will of course need to keep your mortgage repayments up to date. Your house mortgage stands outside your PIA. If you were made bankrupt your Bankruptcy Trustee would need to take steps to sell the equity in your property, whether that be to your spouse or a third party.

How is the vote counted?

At least 75% of votes (in value) and at least 50% of votes (in number) must be in favour of your PIA.

If your creditors don’t vote in favour of your PIA you will still have the option of negotiating an informal arrangement with your creditors or you can become bankrupt.

Do I have to pay any costs to set up a Personal Insolvency Agreement?

Once your agreement is approved our fees will come out of the regular contributions you make.

Who regulates Debt Free?

Our Registered Trustee with AFSA is a fully qualified Chartered Accountant and is a member of the Institute of Chartered Accountants in Australia and the Insolvency Practitioners Association of Australia. The Australian Financial Security Authority also regularly monitors and audits our PIA files for strict compliance.

Debt Free helped some Australians : read our Personal Insolvency Agreement case studies