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Tell us about your current financial position, from there we can go through your options, and the benefits and consequences of those options.
A type of formal payment arrangement you may be able to enter into with your creditors, there are certain eligibility criteria that need to be met
A type of formal payment plan you may be able to enter into with your creditors
When a company becomes insolvent it is unable to pay its debts when they become due and payable
Part IX debt agreement
A Part IX debt agreement is a legally binding arrangement that can be entered into with affected creditors. It is an administration under the Bankruptcy Act 1966 and is an alternative to bankruptcy for individuals not wishing to become bankrupt.
The Process:
Once a debt agreement proposal is compiled and signed, it needs to be lodged with the Australian Financial Security Authority (AFSA). AFSA will then forward the proposal to debt agreement creditors asking them to vote by the nominated deadline date (the voting period is generally five weeks).
Once the deadline date for voting expires, AFSA collate the votes received. In order for the proposal to be accepted, a majority in dollar value of creditors voting needs to be achieved. If the debt agreement is accepted you are then bound to the terms of the proposal.
In the event that the proposal is rejected by AFSA, your creditors, or the proposal lapses (no one votes on the proposal) you will be notified of the outcome from AFSA.
Eligibility criteria:
- A person who is insolvent (unable to pay their debts when they become due and payable) can submit a debt agreement proposal.
- A person who has not been in a debt agreement, filed for bankruptcy or been subject to a personal insolvency agreement within the last ten years.
- A person with unsecured debts less than the current prescribed liability threshold of $148,129.80
- A person with after tax income less than the current prescribed income threshold of $111,097.35
- A person with net assets less than the current prescribed asset threshold of $296,259.60
Part IX debt agreement: Benefits
- Interest and charges become frozen on debt agreement debts (note: you will not be able to continue using credit cards / credit facilities that are part of the debt agreement
- A creditor cannot enforce recovery action against you in relation to a debt subject to the debt agreement
- A single payment is made into the debt agreement rather than multiple payments to multiple creditors
- Payments made under the debt agreement are based on what you can afford to pay rather than what is being demanded by debt agreement creditors. It is important to note that a debt agreement is NOT a consolidation loan.
Part IX debt agreement: Consequences
- A debt agreement is an act of Bankruptcy
- A notation will appear on your credit file making it difficult to obtain further credit
- A notation will be recorded on the National Personal Insolvency Index (NPII)
Frequently asked questions
- How long does a Part IX debt agreement stay on your credit file?
- What is the National Personal Insolvency Index (NPII)?
- What debts are covered in a Part IX debt agreement?
- How long do Part IX debt agreements run for?
- Where can I get more information?
Part IX debt agreement: Frequently asked questions
How long does a Part IX debt agreement stay on my credit file?
- A notation will appear on your credit file for a period of
Completed debt agreements (all of debt agreement obligations discharged)
– The period of 5 years that starts on the day on which the agreement is made; or
– The date the obligations are complete, whichever is later.
Terminated debt agreements (obligations not discharged)
– The period of 5 years that starts on the day on which the agreement is made; or
– 2 years from the date of termination, whichever is later
Debt agreements declared void by order of the Court
– The period of 5 years that starts on the day on which the agreement is made; or
– 2 years from the date of the Court order, whichever is later
- A notation will appear on the National Personal Insolvency Index (NPII), a listing on the NPII may cause issues in certain areas of employment where a specific licence or registration needs to be held. The time it will remain listed varies depending on how the debt agreement comes to an end:
Completed debt agreements (all of debt agreement obligations discharged)
– 5 years from the date the debt agreement was made; or
– The date the obligations were completed, whichever is later
Terminated debt agreements (obligations not discharged)
– 5 years from the date the debt agreement starts; or
– 2 years from the date of termination, whichever is later
Debt agreements declared void by order of the Court
– 5 years from the date the debt agreement starts; or
– 2 years from the date of the Court order, whichever is later
Withdrawn, rejected, cancelled or lapsed debt agreement proposals
Will remain listed on the NPII for 1 year from the day that:
– You withdraw the proposal
– The proposal is rejected by the required majority of creditors
– The acceptance of your proposal was cancelled by the Australian Financial Security Authority
– The proposal lapses
What is the National Personal Insolvency Index (NPII)?
The NPII is an electronic register that records personal insolvency administration information including, the name, date of birth, previous names, the type of personal insolvency administration and details of the insolvency practitioner administering the arrangement. This index can be accessed by paying the relevant search fee and visiting:
Bankruptcy Register search | Australian Financial Security Authority (afsa.gov.au)
The NPII does not contain information on corporate insolvency matters, this information can be accessed by visiting Insolvency | ASIC
What debts are covered in a Part IX debt agreement?
A debt agreement can include most unsecured debts such as credit cards, personal loans, overdrawn bank accounts, arrears on utility bills.
However, certain debts cannot be included in a debt agreement, you may still be liable to pay: debts incurred after you have submitted your debt agreement proposal, Court fines, student loans, victims of crime
Secured creditors
You are still need to make the required payments to a secured creditor to avoid that creditor from repossessing the asset they hold security over, such as a mortgage, car loan or hire purchase
How long do Part IX debt agreements run for?
The term of a debt agreement is normally established after a budgeting exercise is conducted to determine what can be offered to creditors in the agreement. There is a maximum timeframe of five years a debt agreement can run for, if the individual entering into it has a residential property that they live in. If an individual does not have a residential property they live , the maximum timeframe a debt agreement can run for is three years.
Where can I get more information?
More information on personal insolvency administrations can be found on the Australian Financial Security Authority website at: Australian Financial Security Authority | Supporting better outcomes for consumers, business and the community. (afsa.gov.au) of by contacting a Financial Counsellor on 1800 007 007
Bankruptcy
Bankruptcy is the process whereby you can be released from most of your debts. This process can be done either voluntarily (Debtor’s Petition) or by a creditor (someone you owe money to) who instigates proceedings against you through court processes (Creditor’s Petition).
A Bankruptcy Trustee is appointed to administer your bankruptcy, this can be a private Registered Trustee or the Official Trustee (Australian Financial Security Authority (AFSA).
A Bankruptcy Trustee has the power to sell certain assets for the benefit of creditors in the bankrupt estate, the trustee’s powers also extend to investigating your financial affairs prior to bankruptcy and requiring you to contribute to the estate from your income if you exceed the current income threshold.
Personal Insolvency Agreement
A Personal Insolvency Agreement (PIA) is an administration under Part X of the Bankruptcy Act 1966 that is a legally binding arrangement you can enter into with your creditors. The arrangement can be based upon a lump settlement or payment of debts by instalment. There are no threshold limits for your income, assets and liabilities to be eligible to enter into a PIA, unlike Part IX debt agreements.
How does it work?
As the PIA is a formal administration under the Bankruptcy Act 1966, it needs to be lodged and registered with the Australian Financial Security Authority (AFSA).
A registered trustee (or solicitor) is then appointed to undertake the following tasks:
- put forward the PIA to your creditors for their consideration
- take control over your property
- make a recommendation to your creditors as to whether it is in their interests or not to accept the PIA
- make detailed enquiries into your financial affairs
- charge a fee for the work undertaken and performed
Your creditors will then be asked to vote on the PIA as to whether they accept it or not.
What happens it creditors vote to REJECT the PIA?
- Your creditors may vote to instead require you to become bankrupt within 7 days of the voting resolution
- If you do not comply with the creditors’ vote, your creditors can apply to the Court to make you bankrupt.
Consequences of doing a PIA
- A notation will appear on your credit file for at least 5 years (in some cases, longer)
- A notation will be made on the National Personal Insolvency Index
- You will not be able to manage a corporation until the PIA has been finalised
- You will not be able to deal with your property without getting the consent of the controlling trustee
Corporate Insolvency
When a company becomes insolvent (unable to pay it’s debts when they become due and payable), personal liability may be incurred by the director(s). Identifying the early stages of corporate insolvency can in some cases limit the personal liability to directors if dealt with swiftly.
Some of the early warning signs, a company may be insolvent are:
- Creditors of the company are not paid within the normal terms of trading
- Insufficient books and records – unable to produce accurate financial information of the company
- Overdue company debts owing to the Australian Taxation Office
- Company does not have sufficient resources to pay its debts
A director of the company may become personally liable for company debts if:
- The director has given a personal guarantee
- The director is issued with a Director Penalty Notice from the Australian Taxation Office and the notice is not complied with within the prescribed timeframe
For a free assessment, contact us today
Australian Debt Counsellors
Registered Debt Agreement Administrator: Benjamin Crawford 1157
Australian Financial Security Authority: 72291