What is a Part X Personal Insolvency Agreement?

When individuals are in dire financial hardship, it can seem like declaring bankruptcy is the only way out, however, there are other options. A Part X Personal Insolvency Agreement (PIA) may allow for some debts to be written off and for payment terms to be negotiated on the remaining debt.

What does a PIA usually include?

A Personal Insolvency Agreement can include unsecured debts including:

• Personal Loans
• Store Cards
• Credit Cards
• Utility Bills
• Phone and Internet Bills
• Legal and Accounting Debts

Joint debts can be included in the agreement, however, creditors can attempt to reclaim the funds from the other person.

Secured debts cannot be included in an agreement including:

• Mortgages (house is security)
• Car Loans (where car is security) 
• Rent to Buy or Hire Purchase (goods held as security)

Consequences of a PIA

The names of people entering into a PIA appears on the National Personal Insolvency Index permanently and on their credit file for approximately five years. The controlling trustee must be consulted if someone with a PIA wants to take any action relating to their assets such as a house. They are obliged to assist their trustee with information when requested. They are not allowed to manage a corporation until after the terms of the PIA have been fulfilled.

If the agreement allows for it, individuals may continue to operate their business. Professional bodies and trade associations may place membership conditions during the agreement. Individuals cannot be a director or manage a corporation until terms of the agreement have been met.

Unlike bankruptcy, assets may be retained if the terms of the PIA allow. If an individual fails to adhere to a PIA, a creditor may apply to the court to make the individual bankrupt.

The Australian Government’s Financial Security Authority requires a fee of 20% of the value of the proposal accepted by creditors.

The Difference Between a Part X PIA and Part IX Debt Agreement?

A Part X PIA is a repayment schedule negotiated with creditors and is often used in cases where the individual is a high income earner and/or has a high level of debt. Debtors usually agree to pay down their debts in larger lump sum payments. Part X PIA is for people who have a complicated financial situation than most individuals unable to pay their debts. Part X PIA has a longer, more involved process than Part IX Debt Agreement.

Part IX Debt Agreement is the most common type of arrangement between individual debtors and creditors. Someone with a high credit card balance, personal loan debt and outstanding bills may opt for this legally binding arrangement. Individuals may be ineligible for a Part IX Debt Agreement if their debts aren’t high enough, they have had a debt agreement or declared bankruptcy in the past ten years.