Part 10 insolvency agreement, also known as the personal insolvency agreement (PIA), is a legal process that allows individuals struggling with debt to make a formal arrangement with their creditors to pay a portion of their debt. It is a formal alternative to bankruptcy and can help individuals avoid the negative consequences associated with bankruptcy.
The PIA is governed by Part 10 of the Bankruptcy Act 1966 and is available to individuals who are insolvent, meaning their liabilities exceed their assets, and are unable to pay their debts as they fall due. The PIA allows individuals to make a proposal to their creditors to pay a portion of their debts over a period of time, usually three to five years. The proposal must be approved by a majority of creditors by both value and number.
One of the advantages of a PIA is that it allows the individual to retain control of their assets, including their home. This can be particularly advantageous for individuals who have a significant amount of equity in their home but are struggling with debt. The PIA can also provide protection against legal action by creditors, such as wage garnishments, asset seizures, or debt collection proceedings.
Another advantage of a PIA is that it can help individuals avoid the long-term negative consequences associated with bankruptcy, such as restrictions on travel, employment, and credit. A PIA is not recorded on the National Personal Insolvency Index, which means it is not publicly available information and will not appear on credit reports.
To be eligible for a PIA, an individual must meet certain criteria. They must be insolvent, have unsecured debts of at least $10,000, and not have been bankrupt or made a PIA proposal in the last six years. They must also have a registered trustee who will administer the PIA and ensure that the proposal is followed.
In conclusion, a Part 10 insolvency agreement can be a useful tool for individuals struggling with debt who want to avoid the negative consequences associated with bankruptcy. It provides a formal alternative to bankruptcy and allows individuals to make a proposal to their creditors to pay a portion of their debts over a period of time. It is important to seek professional advice when considering a PIA, as it can have significant legal and financial implications.