The third alternative to bankruptcy is a proposal under Part X of the Bankruptcy Act 1966 (Cth), which is administered by either a registered trustee or the Official Trustee. There are three types of proposal available. These are a composition proposal; a deed of assignment proposal and a deed of arrangement proposal. The type of proposal that is adopted is dependent on the debtor’s financial situation.


A composition proposal is best suited to a debtor with no assets and no substantial income but is in receipt of a lump sum (usually by a relative or friend). This amount is then offered to creditors in full satisfaction of their debts.

Deed of assignment

A deed of assignment will generally be suitable for those debtors with assets but no substantial income. That property which would have been made available if the debtor had been declared bankrupt now becomes available to the creditors. However, money from the sale of the debtor’s assets is the only source of funds available to creditors.

Deed of arrangement

A deed of arrangement will be suitable for those debtors with substantial income and/or assets. Deeds of arrangement are generally conducted as a means by which the debtor proposes to pay a certain amount of their income each month to the trustee for a certain period of time. Some or all of the debtors assets may also be assigned to pay the debt. A debtor running a business should not assign business assets required to generate income.

Once the debtor has decided on the type of proposal the trustee will then send a report to the creditors. This report details the terms of the debtor’s proposal; the expected benefit to creditors and; the alternatives if it is not accepted. Unless the proposal is realistically achievable the creditors will commence recovery action.

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