Personal finance

Personal Insolvency Agreement: What Should You Know?

When we talk about bankruptcy, you must have often heard about personal insolvency as well. It is a legal binding agreement between a debtor and creditor to pay the debt in full, or in installment, or as an agreed lump sum amount. PIA or Personal Insolvency Agreement is a flexible agreement that allows the debtor to avoid bankruptcy. It can involve the sale or transfer of an asset to pay the creditors. In the case of PIA, a trustee is appointed to analyze the debtor’s financial affairs and administer the arrangement.

What does a personal insolvency agreement include?

Here is what a PIA includes:

  1. Appointing a trustee to assess and manage your property and make an offer to the creditors. They also manage your assets and make the necessary arrangements
  2. The offer may include a lump-sum payment or a part payment
  3. For one to be eligible for PIA, you don’t need to have debts or assets or income limits
  4. The length of PIA depends on what you negotiate with your trustee and creditors
  5. You may retain your asset
  6. Don’t forget to talk about fees that your trustee would charge

We can say that the PIA or Personal Insolvency Agreement is a way to overcome from unsecured debts, once you complete other obligations mentioned in the agreement. But you may still need to pay certain debts. Some of the debts that you need to pay are as follows:

Unsecured debts:

The following are included in unsecured debts:

  1. Unsecured personal loan
  2. Bills of electricity, internet, phone and gas
  3. Credit cards
  4. Fees (medical and legal)
  5. Payday loan
  6. Unpaid rents
  7. Overdrawn bank accounts

A creditor can put the debtor in legal formalities if the debtor gets into any of the following situations:

  1. Debts because of fraud
  2. Debts falling under a maintenance agreement
  3. HELP debts
  4. Court order fines

You must not miss choosing your trustee carefully, because they will be helping you to get rid of debts and release clause in your PIA. Here you must know that debts covered by PIA are the same as those for bankruptcy.

Secured debts

Well, PIA may not help you from secured debts. It is associated with a specific asset or property. In this, the creditor has the right to reclaim property you put as collateral in case you fail to make repayment. Your trustee will connect with your creditor to discuss debt terms. In case you are not able to make the payment, you can surrender the goods you offered as security. It includes:

  1. Mortgage, like house as security
  2. Car
  3. Hire purchase or rent to buy

Joint debts

Another kind of debt that may lead to PIA is a joint debt. As evident from the name, this kind of debt jointly involves two or more people. Well, in such a case, if all the partners enter into a PIA agreement, the creditor can pursue any of them for repayment.

Tax debts

Australian Taxation Office (ATO) debts are also included in personal insolvency agreement. But ATO will keep your tax refunds in case you owe a debt.

A common question that arises here is what can be included in PIA?

It can include any of the following:

  1. Funds over time
  2. Lump-sum money
  3. Money from the sale of assets
  4. Or a combination of any of the above-mentioned points

The information mentioned above involves some of the crucial aspects of PIA or personal insolvency agreement. You can also seek legal assistance from PIA practitioners for creating PIA.

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