Avoiding bankruptcy is undoubtedly the best outcome for all parties. Our advisors are committed to providing strategic and practical solutions both under formal arrangements and where appropriate informal arrangements, to avoid bankruptcy and provide optimal turn around for all parties. Our team of personal insolvency solicitors have expertise to provide practical and innovative advice in relation to the administration of personal insolvency under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act).
Pre-insolvency Strategic Advice
When a person finds themselves in financial difficulty, the person must decide what action to take. Debt Agreements and Personal Insolvency Agreements can be entered into with creditors and which may avoid Bankruptcy altogether.
Debt Agreements – Part IX
A Debt Agreement under Part IX of the Bankruptcy Act is a process whereby negotiations are sought by an administrator to reach a formal binding agreement with creditors. Debt Agreements are an alternative to bankruptcy and allow people with limited income and assets to enter into an agreement with creditors in respect to the repayment of debts over an extended period of time, usually 3 – 5 years. While there are limitations in entering into such an agreement, Debt Agreements can be quite advantageous. Firstly and upon acceptance, creditors cannot commence or proceed with a recovery action against the debtor. Secondly, restrictions that traditionally attach to Bankruptcy do not apply to Debt Agreements. Finally, upon entering a Debt Agreement, debts are consolidated thereby releasing the debtor from making individual payments to each creditor.
Personal Insolvency Agreements – Part X
A Part X Personal Insolvency Agreement (PIA) is an alternative to bankruptcy and more suitable for high-income individuals with a high net worth. Under Part X of the Bankruptcy Act, a person may call for a meeting of his or her creditors at which time the debtor may propose a plan for satisfying respective debts under a PIA. The process of a PIA is more structured and formal than a Debt Agreement, noting that property becomes under the control of a formal Trustee, a formal meeting with creditors must be held to discuss a PIA and a detailed report must be sent to the creditors following such agreement.
Bankruptcy and Annulment
Bankruptcy is the process whereby the affairs of an insolvent debtor are administered under the Bankruptcy Act. There are two ways a debtor can become bankrupt, namely under a creditors petition or under a debtors petition. In certain circumstances, it may be appropriate for a debtor to voluntarily declare bankruptcy by filing a debtor’s petition in court. Filing for bankruptcy under a debtor’s petition has certain strategic advantages. Pursuant to section 73 the Bankruptcy Act, a person who is a bankrupt may propose an arrangement with his or her creditors for the repayment of debt. Upon acceptance of the proposal, the debtor’s bankruptcy status is annulled. Our team of bankruptcy advisors have the expertise to assist our clients with such arrangements and achieve solvency.
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