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Personal Insolvency Agreement
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At Debt Free Australia we have a proven track record in helping Australians solve their debt problems by avoiding bankruptcy with a legally binding Personal Insolvency Agreement.
To help explain how you can avoid bankruptcy with a legally binding Personal Insolvency Agreement we have provided answers to the most common questions we are asked.
If any aspect is unclear please call our friendly staff on our toll free number 1800 676 598.
Use Our Checklist To See If You Qualify For A Personal Insolvency Agreement
Do I qualify for a Personal Insolvency Agreement?
You qualify for a personal insolvency agreement if you meet the following criteria:
You are considered insolvent (unable to pay your debts as and when they fall due); and
Have unsecured debts more than > $114,478.00 or
Have equity in assets more than > $114,478.00; or
Regularly employed & annual income is more than >$85,858.50 (after tax) or approximately >$120,304 (before tax for Australian residents)
What Is A Personal Insolvency Agreement?
Find out what a Personal Insolvency Agreement is
A Personal Insolvency Agreement is an agreement you can reach with your creditors if you can no longer afford to repay the debt. Only people who have been struggling with debt for some time can enter into a Personal Insolvency Agreement. A Personal Insolvency Agreement is basically an arrangement with your creditors to pay an agreed amount over a period of time (usually this ranges from 3 to 5 years). In most cases you can settle your debts for less than what is owed and the balance will be legally written off.
A PIA IS AN ARRANGEMENT WITH YOUR CREDITORS TO PAY
BACK AN AGREED AMOUNT, GENERALLY OVER 3 TO 5 YEARS
A Personal Insolvency Agreement is regulated under the Bankruptcy Act so it is a formal agreement and as such it must be supervised by a Registered Trustee. Many people think that because it is regulated under the Bankruptcy Act, it is bankruptcy, but it should never be confused as bankruptcy. A Personal Insolvency Agreement is a legal alternative to bankruptcy.
A PERSONAL INSOLVENCY AGREEMENT MUST BE SUPERVISED BY
A REGISTERED TRUSTEE
How Do I Set Up A Personal Insolvency
Find out how
Appoint a Controlling Trustee
The Trustee investigates your financial affairs and prepares a report for your creditors
The Trustee will call a meeting with your creditors within 30 days of being appointed
To set up a PIA, you need to firstly appoint a Controlling Trustee. A Controlling Trustee is typically a Registered Bankruptcy Trustee, but a solicitor can also act as a Controlling Trustee. You appoint a Controlling Trustee by signing a 188 Authority.
Once you execute a 188 authority, your assets become subject to the control of your Controlling Trustee and the Trustee will then investigate your financial affairs and prepare a report to your creditors. The report to creditors will include a summary of your current financial position (i.e. your assets and liabilities) and your proposed PIA. The Controlling Trustee must form an opinion on your proposed PIA and recommend as to whether it is in the best interests of your creditors or not. Typically a Controlling Trustee will recommend a Personal Insolvency Agreement proposal if it provides your creditors with a better outcome compared to if you went bankrupt. The Controlling Trustee will also call a meeting of your creditors within 30 business days of being appointed. At this meeting your creditors will be asked to vote on your proposal. For it to be accepted, creditors who vote must hold at least 75% of the debt (in value) and at least 50% of the debt (in number of creditors) must approve it. So for example, if you have $100,000 in debt and have 5 creditors (and all of whom participated at the meeting) then you would need the support of at least 3 creditors with their combined debts exceeding $75,001.
If you meet this voting criteria then all other creditors (whether they voted or not) will be bound by the PIA.
In Our Experience, Creditors Often Request 60 Cents In The Dollar
What Will Creditors Accept?
What do they accept?
In our experience, most creditors want to receive at least 60 cents in the dollar. So if you owe $100,000 in debt, the creditors want to receive at least $60,000 (after costs and charges of administering the Personal Insolvency Agreement).
Why Would I Go To The Trouble Of Proposing
A Formal Personal Insolvency Agreement?
Find out why
There are many benefits to proposing a PIA (particularly if you compare these benefits to bankruptcy). These benefits are briefly listed below:
- The interest on the debt is frozen
- You only pay back what you can afford to repay (and the balance of the debt will be written off)
- All creditor enquiries will be handled by us (so you won’t be hassled by your creditors)
- Once your agreement is accepted your assets will be protected from most enforcement action (whereas in bankruptcy most assets will be sold)
- You will be free to travel overseas (whereas in bankruptcy you won’t have this freedom)
- You won’t be subject to a yearly assessment of your income (whereas in bankruptcy will you be subject to a yearly assessment of your income and may need to pay compulsory contributions and these typically increase if you earn more)
UNDER A PIA, ALL INTERESTS ON YOUR DEBTS WILL BE FROZEN
What Debts Go Into A Personal Insolvency
Find out here
Only unsecured debts can go into a Personal Insolvency Agreement, so typically they would include credit cards, personal loans, store cards or any shortfall on an old secured debt.
Secured debts cannot go into a Personal Insolvency Agreement. So if you have a secured debt, like a car loan or a house loan, then these debts will need to be paid outside of the Personal Insolvency Agreement. If you have sold the asset which was subject to the security of the secured debt, then any shortfall can be included in the Personal Insolvency Agreement.
DID YOU KNOW:
ONLY UNSECURED DEBTS CAN GO INTO A PERSONAL INSOLVENCY AGREEMENT
How Is It Different To Bankruptcy?
How is it different
Firstly, a PIA should not be confused with full blown bankruptcy, because it is not. A Personal Insolvency Agreement is a legal alternative to bankruptcy. It is a far more flexible arrangement with your creditors and it is an agreement where you have agreed to pay a certain sum of money over a certain period of time. This money will be used to repay your debts (after administration costs and expenses). If the amount paid into your Personal Insolvency Agreement is less than what you currently owe, then the balance of the debt will be written off (after you successfully completed your agreement).
A PIA IS A FAR MORE FLEXIBLE ALTERNATIVE SOLUTION TO BANKRUPTCY
Are There Any Consequences Of Proposing Or
Entering Into A Personal Insolvency Agreement?
Are there any consequences?
The consequences of entering into a Personal Insolvency Agreement are listed below:
- The Personal Insolvency Agreement will be listed on your credit file for a minimum of 5 years (unless if the agreement runs
longer than 5 years); and
- Your name will be published on the National Personal Insolvency Index (which is maintained by AFSA)
STILL HAVE A QUESTION?
CALL US ON |1800 676 598
AND WE WILL EXPLAIN THIS OPTION TO YOU
Who Should I Deal With And Trust To Set Up
A Personal Insolvency Agreement?
Who is the right person?
You should only deal with a Registered Trustee..
You should only deal with a fully licensed and registered Insolvency Practitioner. A Personal Insolvency Agreement can only be supervised by a Registered Trustee, so for that reason it makes sense that you deal with a Registered Trustee when setting up your Personal Insolvency Agreement. Some companies will say that they will help you set up a Personal Insolvency Agreement and then “pass on” your case to a Trustee down the track.
Here at Debt Free Australia, we have a fully licensed Registered Trustee and we can help you set up a PIA from the beginning. In fact we won’t charge you any money at all until we have fully qualified you as being eligible for a PIA and you are ready to sign the 188 authority.
AT DEBT FREE AUSTRALIA, WE WON'T PASS YOUR CASE ONTO A TRUSTEE DOWN THE TRACK YOU WILL DEAL WITH OUR REGISTERED TRUSTEE FROM YOUR FIRST CALL
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Australian External Dispute Resolution Scheme:
Financial Ombudsman Service Limited
GPO Box 3
Melbourne VIC 3001
Phone: 1800 931 678 (free call)