Marino Law | Gold Coast Law Firm

Personal Insolvency Agreements

A personal insolvency agreement (PIA) is a legally binding arrangement between a debtor and his or her creditors whereby the debtor offers to pay creditors in full or part by instalments or a lump sum. Unlike a debt agreement, there are no debt, asset or income limits to be eligible to propose a PIA. There are two steps necessary for the creation and putting into effect of a PIA:

1. Appointment of a controlling trustee

PIA debtors must appoint a controlling trustee. Only a registered trustee, the Official Trustee or a suitably qualified solicitor can act as a controlling trustee.

The appointment of a controlling trustee has a number of significant adverse consequences:

  • it is an ‘act of bankruptcy’ and so a creditor can use this to apply to court to make the debtor bankrupt if the attempt to set up a personal insolvency agreement fails
  • the appointment (and, if it eventuates, the setting up of a personal insolvency agreement) will be recorded on the National Personal Insolvency Index forever
  • details may also appear on a record held by a credit reporting agency for up to seven years

2. Acceptance of the proposal by creditors

A meeting of creditors is held to consider the debtor’s proposal. The debtor’s offer must be accepted by a special resolution (which is a majority in number and at least three-fourths in value of the creditors personally present, by telephone, by attorney or by proxy at the meeting) of the debtor’s creditors. Should their creditors accept the proposal, a trustee must administer the agreement.

The Bankruptcy Act provides that PIAs may be set aside by a Court on a number of grounds such as unreasonableness or non-compliance with the requirements of the Bankruptcy Act 1966 (Cth).

Our team of experienced insolvency lawyers can assist you with all aspects of personal insolvency.

To find out more about what we can offer, visit our areas of law pages or contact our insolvency solicitors for a consultation.

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