Part IX & Part X Debt Agreement

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    What is a Part IX Debt Agreement?

    A Part IX Debt Agreement is a formal arrangement between a person and their creditors, which is legislated under the Bankruptcy Act (the Act). It is a government monitored scheme and managed by a Debt Agreement Administrator.

    Debt Agreements are suitable only in very specific circumstances for debtors with relatively small debts, low incomes and little property.

    To be eligible you must:

    • not have been bankrupt or had a debt agreement in the past 10 years
    • have unsecured debts of less than $137,537.40
    • have divisible property less than $275,074.80
    • have estimated after-tax income for the next 12 months of less than $103,153.05
    • be able to afford the repayments under the Debt Agreement.

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    What is a Part X Debt Agreement?

    Part X of the Bankruptcy Act 1966 allows individuals to enter into a formal agreement with creditors, known as a Personal Insolvency Agreement (PIA), in full and final satisfaction of their debts and avoid bankruptcy. A PIA will allow you to move forward without some of the restrictions of bankruptcy.

    A Part X PIA requires:

    The appointment of a bankruptcy trustee to take control of your property; and making an offer to creditors to settle your debts (including the ATO).

    The offer may be to pay all or part of your debts by selling property, paying a lump sum or instalments, or by a combination of those.

    If the required amount of your creditors agree, then the agreement remains in place until it is completed, and the debtor avoids bankruptcy.

    The voting for a PIA is done by a special resolution. A special resolution is a resolution passed by a majority in number and at least 75% in value of the creditors represented at the meeting, who vote on the proposal.

    Some of the advantages of using a Part X PIA rather than going bankrupt are:

    • Avoid the restrictions of bankruptcy;
    • There are no income contribution requirements;
    • There are no asset ownership restrictions;
    • Only property included in the PIA (if any) is affected, so other property is not available to creditors.
    • The arrangement binds creditors;
    • There are no international travel restrictions;
    • Speedy relief from creditor actions;
    • The debtor is given a fresh start.

    A PIA might be the right choice if you wish to avoid bankruptcy. We are able to:

    • evaluate your financial situation
    • identify your debt relief options;
    • help you proceed with the best option; and
    • support you throughout the whole process.

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    If you meet the Act’s eligibility criteria, the usual steps are:

    • Appointment of a Debt Agreement Administrator.
    • The administrator helps with the preparation of the debt agreement proposal, based on what you can afford to pay back.
    • The administrator lodges your debt agreement proposal with the Australian Financial Security Authority (AFSA).
    • AFSA circulates your debt agreement proposal to creditors and collates their votes.
    • Your creditors vote to accept or reject your proposal.
    • If the majority of creditors accept it, the debt agreement proposal becomes a Debt Agreement. All creditors receive the same proportion of what is owed — for example, if you pay back 90% of your debts over five years, each creditor gets 90% of what you owe them.

  • Benefits of Debt Agreement

    A better alternative to full bankruptcy.

    • No restrictions on being the director of, or otherwise managing, a company.
    • Can acquire new assets.
    • Interest on unsecured debts is frozen. Only the amount payable at the date that the Debt Agreement is accepted by creditors is claimable.
    • Creditors cannot pursue a debtor legally to recover money owed.
    • Retention of property within the equity threshold.

Did You Know?

Commercial Necessity Phoenix is legal and recognises the fact that sometimes the need to restructure (phoenix) may arise out of events outside of the business owner’s control. This type of phoenix is considered a business rescue.

Business Restructure

How it Works

If you are considering a business restructure, de Jonge Read will review your situation carefully. We consider both business and personal aspects.

We then prepare a written recommendation, specifically designed to your unique circumstance on how to achieve the best outcome possible for you and your business.

We do this obligation-free and at no cost to you!

  • 1 Schedule a free consultation with one of our strategists
  • 2 A no-obligation tailored strategy is prepared to suit your individual circumstances
  • 3 If you decide to proceed, you’ll have a Strategy Support Officer assigned to you. Our team is here to hold your hand throughout the whole process