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A debtor must be insolvent to propose a Personal Insolvency Agreement (PIA). Unlike Part IX agreements, a PIA is administers by a trustee or a qualified solicitor. The outcomes are similar to Part IX agreements in that there will be a partial or full payment of debts to creditors. Lump sums, transfer of property, or a payment schedule may be the means of discharging the debts of the debtor.

A trustee will examine the debtor’s proposal for repayments, make enquiries into the debtor’s affairs and report to creditors. The next step is a creditors’ meeting.

Creditors’ meeting

Following receipt of the trustees report creditors are invited to a meeting to vote on the proposal. A special resolution must be passed by creditors having at least 75% of the value of the debts, voting in person or by proxy, for it to be accepted. Once the resulting deed is executed by the debtor, it is binding on all creditors. All creditors should attend the meeting, either in person or by proxy, as it allows them to seek further information about the proposal, including the trustees fees which are paid before the creditors receive anything. Trustees usually charge an hourly rate and if the proposal is to operate, for three years for example, than the trustees costs could be substantial. Secured creditors’ debts are not affected by a PIA, it is only unsecured creditors who are affected.

When a proposal has been accepted

Once a debtor executes a deed of assignment or creditors accept a composition, the debtor is released from their provable unsecured debts. The debtor is not released under a deed of arrangement until the terms of the deed have been fulfilled. For more information see the AFSA website.

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