Expert Bankruptcy and Creditors Advice
We recommend submitting a Part X Debt Agreement. The relevant provisions for Personal Insolvency Agreements (PIA) can be found in Part X of the Bankruptcy Act 1966, which provide a process for a debtor to make a proposal to creditors in satisfaction of their debts. A PIA provides a mechanism for an individual to avoid going into bankruptcy.
A person wishing to commence a PIA must complete a number of documents including:
- A Section 188 authority
- A Statement of Affairs
- A draft proposal for a PIA
A meeting is held within 25 business days after the execution of the 188 authority (or 30 days if signed in December). For the PIA to be accepted, a special resolution must be passed being greater than 75% in value and greater than 50% in number of the creditors voting on the resolution. If accepted by creditors, the individual will be required to execute a Personal Insolvency Agreement.
Benefits to an individual and the creditors with a PIA include:
- The provisions provide flexibility in the terms of any offer by an individual to creditors. An individual can submit terms that suit his or her circumstances e.g. moratorium on debts, up-front contribution, instalments over time, funds from realisation of assets, etc
- The process provides for the receipt of funds and distribution to creditors in an orderly manner
- Creditors are prevented from taking further steps to recover debts owed whilst the proposal is being considered
- Creditors generally receive a greater return and in a more timely manner compared to bankruptcy
- The fees and outlays with a PIA may be lower than administering a bankruptcy
Brisbane Debt Solutions have many years of experience with personal insolvency and bankruptcy agreements. We are here to help you through bankruptcy.
Bankruptcy and Creditors FAQ’s
Can creditors force an individual or business into bankruptcy?
Yes, creditors can initiate bankruptcy proceedings against an individual or business if they are owed a debt of more than $10,000, and the debt is not being paid. However, before initiating bankruptcy proceedings, creditors must first issue a statutory demand for payment, giving the debtor 21 days to pay or come to a payment agreement. If the debtor fails to respond to the statutory demand, the creditor can then initiate bankruptcy proceedings.
What happens to outstanding debts when an individual or business declares bankruptcy?
When an individual or business declares bankruptcy, all outstanding debts are typically forgiven, with some exceptions, such as debts related to child support or court-imposed fines. However, bankruptcy can have significant financial and personal consequences, including the loss of assets, restrictions on employment and travel, and damage to credit ratings.
Can bankruptcy be avoided through negotiation with creditors?
Yes, in some cases, bankruptcy can be avoided through negotiation with creditors. This may involve proposing a repayment plan or settlement agreement to creditors, or negotiating with creditors to write off a portion of the debt owed. Brisbane Debt Solutions can assist individuals and businesses in negotiating with creditors to find a solution that avoids bankruptcy and minimizes the impact on the individual or business’s financial position.