Formal administrations available to insolvent individuals are not limited to Bankruptcy (Part IV) or Debt Agreement (Part IX). The other form of administration is referred to as a Personal Insolvency Agreement (Part X).

A PIA has no restrictions as to thresholds on either the amount of debt, income or assets of the individual.

However, in order to propose a PIA the debtor must, in the first instance, engage a Controlling Trustee. The Controlling Trustee upon consenting to act in that capacity will take into trust the estate of the debtor – all assets and hold those assets until there is an outcome from a creditors meeting which is a legal requirement.

At the creditors meeting, creditors will vote as to the proposal for settlement that has been placed before them. The form of the proposal will be developed by the Controlling Trustee in conjunction with the debtor. Creditors may also resolve at the meeting that:

• The proposal be accepted; or
• The proposal be changed; or
• The debtor present a Debtor’s Petition in Bankruptcy; or
• The debtor’s property be released back to the debtor from the control of the trustee.

Before contemplating this form of administration the debtor should consider the costs involved in engaging a Controlling Trustee. Many will seek an up-front fee of a substantial amount. The trustee may sell some assets of the debtor to meet those fees, including the family home.

Generally, a PIA is only practical and affordable for business debtors who wish to compromise creditors and still remain in business – although available credit may dry up from suppliers affected by the compromise agreement.

Some trustees will permit an instalment payment system to be implemented in much the same manner as a Part IX however this should be discussed with the controlling trustee prior to their being appointed.