Personal Insolvency Agreements (PIA’S)
PIA’S are an alternative to bankruptcy that provides a process by which a debtor may make a proposal to their creditors which they consider and vote upon at a formal meeting.
Once accepted, the proposal is binding on the debtor and all creditors in respect of their unsecured provable debts. It enables the debtor and creditors to come to a mutually agreed compromise in a relatively simple way without reference to the court.
There are 4 basic steps in setting up an agreement. These are:
- appointing a controlling trustee;
- calling a meeting of creditors;
- the controlling trustee’s report; and
- the meeting
This process is usually completed within 35 days of appointment of a controlling trustee. In some instances an adjournment of the meeting occurs when further information is required to enable creditors to be fully acquainted with the debtor’s affairs or the proposal.
Debtors who sign an authority are disqualified under the Corporations Act from managing a corporation if they enter into a Personal Insolvency Agreement under Part X and the terms of the agreement have not been fully complied with.