Part IX Debt Agreements
A Part IX Debt Agreement is an option available to an individual debtor as an alternative to bankruptcy.
In order to avoid bankruptcy, a person who has net assets, creditors and income under a certain statutory limit, may put forward a proposal for a Part IX Debt Agreement. Such a proposal will usually involve a person agreeing to pay a certain amount in a lump sum or by installments over time (which is generally less than the total amount owed to creditors). If the proposal is accepted by the person’s creditors, then it is binding on all unsecured creditors and the administrator of the agreement will collect the amount(s) payable by the person and distribute the funds received to creditors on an equal pro rata basis.
However, a Part IX Debt Agreement is not available to all people in financial difficulties and such an arrangement is only available to debtors who have assets, liabilities and income less than prescribed thresholds.
Benefits of a Part IX Debt Agreement
The benefits of a Part IX Debt Agreement, include avoiding bankruptcy and the restrictions to which a bankrupt is subject including certain travel restrictions and restrictions on acting as a company director. The person is only required to make payments to the administrator of the agreement and they no longer have to deal with or make payments to individual creditors who are to participate in the distribution of funds (such as the ATO, credit cards and loans).
Provided the Part IX Debt Agreement is complied with, most debts owed to creditors are released, although there are some exceptions as there are certain types of debts which are not released by either a Part IX Debt Agreement or by bankruptcy.
Advice Regarding Part IX Debt Agreements
If you are seeking advice regarding the possibility of putting forward a proposal for a Part IX Debt Agreement, please contact our Brisbane or Gold Coast office and our experienced staff will be able to assist you.