The Personal Insolvency Agreement Breakdown

Are you considering applying for a Personal Insolvency Agreement with your creditors?

Previously, the only option people had if they could not pay off all their debts was to apply for bankruptcy. Nowadays however, an initiative made by the Australian Government means that now debtors have the option to negotiate a legally binding Personal Insolvency Agreement with their creditors. Under this agreement, debtors are only required to pay back what they can afford (subject to acceptance by your creditors). Such an alternative provide individuals with more flexibility and the opportunity to avoid bankruptcy, which would otherwise present more serious consequences for their future.

For this reason and much more, Personal Insolvency Agreements are an appealing option to insolvent individuals, however there are a number of factors one must consider before entering into one.

  1. Eligibility – A Personal Insolvency Agreement is not suitable, nor available, for every debtor and a specific eligibility criteria applies. According to the Australian Financial Security Authority, some conditions to be eligible for a Personal Insolvency Agreement includes that one must be insolvent, have not applied for another one in the past six months and must have residential or business connections to Australia.
  2. Business operation and management – Unfortunately one cannot act as a company director whilst subject to a Personal Insolvency Agreement, but you can run a business as a sole trader.
  3. Fees –There are a number of fees associated with a Personal Insolvency Agreement, including a statutory filling fee as well as a government levy.
  4. Threshold requirements – Unlike a Debt Agreement, there are no income, asset or debt thresholds that apply to a Personal Insolvency Agreement, however, your appointed Trustee will be able to advise you on the best option.
  5. Payments from income –Most successful agreements provide for a portion of your income to be paid into the agreement from which your creditors get paid.
  6. Duration –The typical Personal Insolvency Agreement will run for a period of 3 to 5 years.

In addition to the above, a Personal Insolvency Agreement needs to provide one’s creditors to receive a higher percentage return than what they would get if you were to declare bankruptcy. This is something that your appointed Trustee will calculate and advise.

If you are facing the prospect of having to apply for a Personal Insolvency Agreement, ISA can help. ISA provides free, expert advice on their 24/7 hotline so that you can get the facts whenever you need it most.

So to say goodbye to your debt and be on your way to a brighter financial future, give ISA a call today on 1800 003 883.


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