• A debt agreement or part IX agreement is an agreement that binds you and your creditors and represents an alternative to bankruptcy for those with unmanageable debt. 
• A debt agreement allows for your release from your debts when you satisfy all obligations including all payments under the agreement. The terms may require:

1. periodic payments from your income;
2. postponement of payments for a certain amount of time;
3. asset sales; or
4. a lump sum payment to creditors.

• You are able to propose a debt agreement if you:

1. are insolvent and are therefore unable to pay your debts as they fall due;
2. have not been bankrupt, entered into a debt agreement or appointed a controlling trustee in the last 10 years; and
3. have unsecured debts, assets and an after-tax income for the next 12 months all less than the specified limits.

• It is important to note that proposing a debt agreement is an act of bankruptcy. 

• A Personal Insolvency Agreement (PIA) allows you to come to a flexible arrangement with your creditors regarding your debts. It enables you to avoid bankruptcy.
• A PIA may involve one or more of the following:

1. payments to creditors from your own money or the money of others such as family or friends;
2. the transfer or payment of sale proceeds of assets to creditors; or
3. a payment arrangement with your creditors that may include a postponement of repayments.

• Yes. You can propose a Personal Insolvency Agreement (PIA) if:

1. you are insolvent and are therefore unable to pay your debts as they fall due; and
2. you reside in Australia or have an Australian connection for example you carry on business in Australia.

• Yes. In a number of situations your application can be rejected. This can include where:

1. it appears from the information you have provided that you are probably able to pay your debts but are simply unwilling to do so; and
2. you have been bankrupt previously.

• You can become bankrupt voluntarily by way of debtor’s petition owing any amount. There is no minimum amount. 
• Your request to be made bankrupt may be rejected in certain circumstances including if it appears you are able to pay your debts.

• It is important that you contact your trustee. If you don’t know who your trustee is you should contact the Australian Financial Security Authority (AFSA) and quote the court reference number. You should be able to find this number on your sequestration order. 
• Your trustee will give you information on the bankruptcy process and can answer any queries you may have. 
• You must assist your trustee and provide them with information when requested to do so. Failure to cooperate with your trustee is an offence.
• Shortly after being notified of your bankruptcy you are required to complete and file a statement of affairs form. This will usually be within 14 days.

• A voluntary bankruptcy is commenced by debtor’s petition. 
• An involuntary bankruptcy is commenced by creditor’s petition. 
• The outcome and consequences are the same regardless of whether you are made bankrupt on your own initiative or that of a creditor. 

• You can only travel overseas with the prior written consent of your trustee. 
• Your trustee will only give you permission if they are satisfied you have genuine reasons to leave the country such as you are required to leave for work.
• If your trustee gives you permission to travel overseas they may impose conditions relating to the period of your travel or the date you must return to Australia among other things.
• Your trustee could deny you permission to travel if:

1. you have failed to fulfil all of your obligations for example failing to file your statement of affairs;
2. you are needed in the country to assist your trustee with the bankruptcy administration; or
3. your trustee has not finalised their investigations.

Question

I entered into a debt agreement 4 months ago. Recently my personal circumstances changed meaning I cannot meet the agreed payment amount. Am I able to request a lower repayment amount and amend my debt agreement? 

Answer

• You may request to amend your agreement by lodging a variation proposal.
• You or any one of your creditors may request to terminate the agreement if its terms are not being followed.
• Creditors vote on a proposal to vary or terminate in the same way they voted on the original proposal. 
• If creditors reject the proposal for variation or termination the agreement will remain in force however you or any one of your creditors can apply to the court for the termination of the agreement.
• The agreement will terminate automatically if:

1. you have not made any payments for six months after a payment is due; or
2. you do not complete your payments within six months of the agreement’s completion date.

Question

I am entering into a debt agreement and am unsure about how I can get out of it. Do I have to wait until I repay all the debts or can it end earlier? 

Answer

• A debt agreement ends when:

1. you have completed all your obligations and payments;
2. the court terminates or declares void the debt agreement; or
3. your creditors terminate the debt agreement.

Question

I entered into a PIA agreement a few months back. My grandfather kindly agreed to pay a large portion of my debt upfront. I will be able to repay the remainder of the debt in fewer instalments than originally thought. Can I request an amendment to my PIA? 

Answer

• A variation of the PIA’s terms is possible upon request. Your trustee will send your creditors a notice of the proposed variation and if no one objects the terms will be varied. 
• In the event of an objection a creditors meeting is called so that the proposed variation can be considered.
• Similarly creditors with your written consent can vary the PIA’s terms by passing a special resolution.
• Furthermore a PIA can be terminated by: 

1. a resolution of your creditors where you are not complying with your obligations; and 
2. by the court in certain circumstances.

• Generally the PIA will end upon the discharge of all obligations under the PIA. This will typically be when your trustee has paid creditors a final dividend.

Question

I will be entering into bankruptcy. I am a little nervous about the whole thing and am not sure what role the trustee will play and what powers they have. 

Answer

• Your trustee has the task of administering your bankruptcy.
• Their duties are set out in the legislation (written law) and they must adhere to certain standards while administering your bankruptcy.
• So that they may pay your creditors your trustee will:

1. sell your assets other than exempt assets;
2. recover any income you earn over a certain amount;
3. investigate your financial affairs; and
4. in some cases recover certain property that you transferred to another or others prior to your bankruptcy.

Question

I was made bankrupt last week and it has been a very distressing time for my family and I. I have heard that the trustee is going to sell all of my assets. I am very stressed about this and I just don't know how my family will cope. Is this true? 

Answer

• When you are made bankrupt a trustee is appointed to administer your bankruptcy and this may include selling certain assets for your creditors’ benefit. 
• Assets are anything of value you own at the time you became bankrupt and anything you buy, receive or become entitled to during your bankruptcy.
• You are permitted to keep certain assets including:

1. most ordinary household items;
2. tools up to a certain value that are used to earn an income;
3. vehicles where the total value of the vehicles minus the sum owing under finance is no more than a certain amount;
4. most balances in regulated superannuation funds and payments from regulated superannuation funds received on or after your date of bankruptcy;
5. life insurance policies for you or your spouse and the proceeds from these policies received after your bankruptcy;
6. compensation for a personal injury and assets bought with such compensation;
7. assets held by you in trust for another person such as your son or daughter’s bank account; and
8. awards such medals or trophies with sentimental value if your creditors agree.

• Apart from the assets you are permitted to keep your trustee may recover any asset including:
• your house and any other property including leases;
• vehicles other than exempt ones;
• shares and other investments including shares held in your employer’s business;

1. tax refunds for income earned before you became bankrupt; 
2. proceeds of a deceased estate; and
3. lottery winnings and other competition prizes.

Question

I have been declared bankrupt and my trustee has informed me that they will be initiating the process of selling my assets. Do I have to disclose my assets? What happens if I do not disclose some of my assets? 

Answer

• Your trustee collects information regarding your assets from a number of different sources including:

1. your filed statement of affairs;
2. you;
3. your creditors;
4. public registers and databases such as the Personal Property Securities Register (PPSR);
5. the various state or territory land title databases; and
6. third parties.

• You may be penalised if you fail to disclose assets regardless of whether they were acquired before or during your bankruptcy. 
• If you acquire assets during your bankruptcy you must advise your trustee in writing within 14 days or as soon as practicable.

Question

Bankruptcy proceedings are going to be initiated against me. I am very stressed about the whole situation but my friend has told me that I may be given an opportunity to lodge a DOI before I can be declared as bankrupt. I am not sure what this is. 

Answer

• A declaration of intention (DOI) provides temporary relief from unsecured creditors who during this period are unable to take any action to recover debts. The temporary relief is usually only 21 days. This stay period does not apply to all creditors and therefore some creditors can continue recovery action despite the stay. 
• During the stay period you may:

1. evaluate your financial position;
2. commence or continue negotiations with your creditors; and 
3. make arrangements with your creditors to circumvent the need to enter a formal arrangement.

• Upon lodging a DOI your creditors receive notification of the stay as well as a copy of your financial affairs.
• You will not automatically become bankrupt after the 21-day stay period but if you fail to make an arrangement with your creditors and do not voluntarily apply for bankruptcy court proceedings may be issued by your creditors.

Question

My friend told me that everyone is given an opportunity to lodge a DOI before they can be declared bankrupt. Is this true? 

Answer

• No. Not everyone is given an opportunity to lodge a DOI. You are eligible to lodge a DOI if:

1. you have not applied for a DOI in the last 12 months;
2. you have not signed a controlling trustee authority in the last six months;
3. you are not presently under a debt agreement, personal insolvency agreement or the subject of a current controlling trustee authority;
4. a creditor has not already petitioned for you to be made bankrupt; and
5. you have a residential or business connection to Australia meaning that you are living in Australia or conduct business in Australia.