A Personal Insolvency Agreement (“PIA“) is an alternative to bankruptcy.

In order to avoid bankruptcy, a person who is unable to pay their debts, or who is suffering financial hardship, can put forward a proposal to their creditors for a PIA.

Appointment of Controlling Trustee in Order to Put Forward a Proposal for a Personal Insolvency Agreement

In order to put forward a proposal for a PIA a person must appoint a controlling trustee who will review the person’s circumstances and provide a report to the person’s creditors, which will include (among other matters):-

  • Brief details of the person’s financial affairs;
  • A summary of the person’s assets (if any);
  • Details of the person’s creditors;
  • A summary of the estimated returns should the person go bankrupt or if the proposal for a PIA is accepted; and
  • A recommendation as to whether or not creditors should accept the proposal for a PIA.

The controlling trustee will then convene a meeting of creditors at which creditors will vote on the PIA proposal.   At the meeting of creditors for the proposal for a PIA to be accepted it must be approved by a special resolution of creditors, being approval by a majority in number and more than 75% of the value of creditors voting at the meeting. If the proposal is accepted then it is binding on all creditors and subject to compliance the person making the proposal will avoid bankruptcy. If the proposal for a PIA is not accepted then the person making the proposal does not automatically become bankrupt, however, it is common that they will in the future.

Possible Form of a Proposal for a Personal Insolvency Agreement

A proposal for a PIA may take many forms, however, it may commonly involve:

  • The sale of certain assets which a person owns; and/or
  • Payment of a lump sum amount by a relative or associate of the debtor; and/or
  • Payment of amounts over time by instalments by the debtor; and/or
  • Certain creditors associated with the debtor agreeing not to claim for a dividend if the proposal is accepted.

Possible Benefits of Entering into a Personal Insolvency Agreement

The benefits of entering into a PIA, may include:

  • Avoiding bankruptcy, which lasts for at least three years;
  • A person being released from their provable debts which they owe to creditors;
  • Certain assets not being sold, which would otherwise be sold in bankruptcy;
  • Some of the restrictions placed upon a bankrupt not applying, including restrictions relating to travel, trading businesses and incurring debts; and
  • There is no requirement to pay income contributions under a PIA, which may be required to be paid in bankruptcy.

Advice Regarding Personal Insolvency Agreements

If you are seeking advice regarding the possibility of appointing a controlling trustee and putting forward a proposal for a PIA, please contact our Brisbane or Gold Coast office and our experienced staff will be able to assist you.

If you are considering Bankruptcy, you may use our Income Contribution Calculator to estimate the income contributions you are liable for.


We’re happy to answer any questions you may have, so please don’t hesitate to call us and schedule a consultation.



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