Personal Insolvency Agreements in Australia

Personal Insolvency Agreements are generally quite similar to the Debt Agreement Proposals but in this case, you do not go bankrupt. In this case, you can strike a compromise with the unsecured debt creditors so that you can pay debts under terms which are favorable to your financial condition. It is a great way of dealing with unmanageable debt.

personal insolvency agreements

Personal insolvency agreements can be highly flexible and allow you to settle debts on very favorable terms without becoming bankrupt. They are generally legally binding arrangements with your creditors whereby you can make an offer to pay up your debts either in full, by installments or as a lump sum.  For the proposal to come into effect, your offer must be accepted by the creditors through a special resolution. One of the great advantages of the insolvency agreements is that there are no restrictions put in place for people who would like to make these arrangements.  For example, you do not have to satisfy any income, debt or asset limits in order to propose a personal insolvency agreement.

In order for your proposal to be accepted, there has to be a “yes” vote from the majority of the creditors. They should make up at least 75% of the dollar value of debts of the voting creditors.  This is usually known as a “special resolution”.

Who Is Eligible to Propose Personal Insolvency Agreements?

One of the main characteristics and advantages of the Personal Insolvency Agreement is that there are no restrictions in terms of the debt and income limits that must be met. Nevertheless, an individual must have the following to be considered eligible to propose the insolvency agreement:

  • You have to be insolvent;
  • You must either be present in Australia or have an Australian connection; and
  • You must not have proposed a similar agreement in the past six months.

As stated, you do not have to meet any asset, income or debt limits in order for you to be involved in these kinds of agreements.

How Do They Work?

The first step is to appoint a controlling trustee that will take charge of your assets. After this, you can put forward a proposal to your creditors. The controlling trustee will examine your proposal, make enquiries into your financial circumstances and creditor reports. They will then advise creditors accordingly on the merit of your proposal and then make a recommendation on why it would be in the creditors’ interest to accept your proposal. If the proposal is accepted by creditors, you will be bound by its terms and conditions. If they reject your proposal, the creditors may choose to vote to make you bankrupt or they may decide not to. In some situations, they will leave it to you to resolve the financial difficulties through other alternative means.

There are numerous alternatives that you could adopt in order to dig yourself out of the rut. These include taking low interest personal loans or bad credit debt consolidation loans which are actually designed for this kind of financial situation. These financial products, say a low interest personal loan, are structured to help you refinance your debts and relieve the creditor pressure off your backs. Please note that in the event that your proposal is rejected or lapses, you will not be able to appoint another official trustee for another six months.

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