Personal insolvency agreements

A debtor may offer to pay creditors in full or in part and the proposal may include divisible property, exempt property, a lump sum and payment by instalment or a mixture of each. 

A controlling trustee is appointed and this in itself is an Act of Bankruptcy upon which a creditor could rely in the event the proposal is not accepted by creditors.  A controlling trustee’s duties and powers include taking immediate control of the debtor’s property, carrying on the business of the debtor if it is in the best interests of creditors to do so and dealing with the debtor’s property in a way that will be in the interests of creditors.


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The control continues until one of the following occurs:

  • the creditors resolve that the property cease to be subject to control
  • the debtor and a trustee execute a personal insolvency agreement following a special resolution of creditors
  • a period of four months has elapsed from the time of the authority being accepted
  • the court releases the debtor’s property from control
  • the debtor becomes a bankrupt
  • the debtor dies.

The controlling trustee examines the debtor’s proposal, investigates and makes enquiries into the debtor's examinable affairs and reports to creditors.  The report must advise creditors of the amount they can expect to receive under the proposal as compared to a bankruptcy and make a recommendation on whether it is in creditors’ best interests to accept or reject the proposal.

The controlling trustee will call a meeting of creditors to consider the debtor’s proposal.  For the proposal to be accepted creditors must pass a special resolution, being the majority in number and at least 75% of the value of creditors eligible to vote and taking part in the meeting.  Once accepted a trustee is appointed and the proposal is binding on the debtor and all creditors in respect of their unsecured provable debts. 

The creditors with the written consent of the debtor may vary a PIA by special resolution at a meeting called for that purpose.  Alternatively, the trustee with the written consent of the debtor, may in, writing, propose a variation of the PIA.  If no creditor lodges a written notice of objection within at least 2 days before the date specified in the notice the proposed variation takes effect.

PIA’s may be set aside by:

  • The court on grounds that the terms of the PIA are unreasonable or are not calculated to benefit the creditors generally or non-compliance with the requirements of the Act.
  • The creditors, if the debtor is in default of the terms of the PIA

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With a team of experts across Australia standing by to discuss your situation, RSM can assist with your personal insolvency agreement needs.