Part IX – Debt Agreement
An insolvent debtors’ best offer to their creditors is determined based on an analysis of their expected income from all sources, household expenses and circumstances. The debtor must prepare an achievable and sustainable offer to their creditors.
The Debt Agreement Administrator or ITSA ensures that proposals comply with the wide range of requirements such as eligibility, clarifying aspects of proposals to ensure creditors are well informed to make a decision on their vote, and conducting the voting process with creditors. ITSA maintains the National Personal Insolvency Index (NPII) to ensure it reflects the status of the agreement.
The debt agreement proposal is sent to creditors to vote upon. It may be accepted or rejected by creditors. A proposal is accepted if a majority of creditors in value vote in favour of the debtor’s proposal. If an agreement is put up and the vote is against, that vote can be used as grounds of Insolvency and to issue a Bankruptcy Notice.
Some examples of the kinds of proposals offered are:
- Periodic payments of amounts out of the debtor’s income to creditors, equal to or less than the full amount of all of the debtor’s provable debts
- Lump sum payment of less than the full amount of all of the debtor’s provable debts
- A moratorium on payment of debts
- Payment from the proceeds of sale of property owned by the debtor
All creditors with provable debts at the time the debtor’s details are entered onto the NPII are bound by the agreement, even those who voted against the proposal. Creditor’s debts are fixed at the date the proposal was entered on the NPII, interest does not accrue and creditors cannot take or continue action against the debtor to collect their debts. The debtor is liable for further debt incurred after ITSA accepts the proposal to send to creditors for voting.
Insolvency Advisory Accountants can help ease you through bankruptcy. Bankruptcy allows you to escape a hopeless financial position and to make a fresh financial start after the three-year bankruptcy period has elapsed. A Debt Agreement under Part 9 (Part IX) of the Bankruptcy Act is designed for debtors who want to avoid full-blown bankruptcy. This Debt Agreement will allow you to repay your debt to your creditors at an affordable level over a 3 – 5 year period. If you have a poor credit history, or want to avoid bankruptcy, speak to one of the professional insolvency experts at Insolvency Advisory Accountants about how you might be eligible to enter into a Debt Agreement arrangement and possibly avoid the bankruptcy process altogether.