What is it?
A personal insolvency agreement is another alternative to bankruptcy. It’s similar to a debt agreement, being a legally binding agreement between you and your unsecured creditors to repay the debt in full or in part in order to avoid bankruptcy. For the agreement to be accepted, a majority of creditors and 75 per cent of the dollar value of the voting creditors need to vote for the proposal.
What are the benefits?
A PIA is a flexible way to come to an arrangement to settle debts without becoming bankrupt. Creditors are bound by the PIA’s terms. Typically, an agreement is structured over a period of time, usually with regular payments – i.e. weekly, fortnightly or monthly payments over 3 to 5 years. Some agreements can even be structured with a lump sum payment to help settle your debts.
What are the consequences?
A PIA will be listed on your credit file for five years (unless your agreement runs for a longer period of time).
Note that the decision to enter into either bankruptcy or a PIA comes down to your current debt levels, current income levels and the equity you have in your assets.
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