Alternatives to Bankruptcy

Depending on your personal circumstances and the solution best suited to your individual case, Hamilton Murphy can assist with alternatives to Bankruptcy.

There are two agreement options in personal insolvency – a Personal Insolvency Agreement, and a Debt agreement. A Personal Insolvency Agreement is an effective approach for debtors to settle their debts without filing for bankruptcy, if the subject’s assets and liabilities are deemed too substantial for a Debt Agreement.

A Personal Insolvency Agreement (sometimes referred to as Part X or Part 10) is an arrangement between a debtor and creditors to pay off debts. The agreement is legally binding and governed under the Bankruptcy Act 1996, and provide individuals with a considerable amount of flexibility when negotiating with their creditors.

Under the agreement, a Registered Trustee is in charge of carrying out the arrangements between the debtor and their creditors. As a Personal Insolvency Agreement does carry insolvency implications, it is crucial for any debtor to understand these and seek early legal counsel and professional advice to determine whether it is a suitable solution.

What circumstances lead to a Personal Insolvency Agreement?

Personal Insolvency Agreements are the last option before Bankruptcy. They are an arrangement available to those who are ineligible for a Debt Agreement (Part IX or Part 9).

The decision to enter a Personal Insolvency Agreement may be driven by a number of factors. For instance, it may be necessary when a person is unable to settle their debts, or they may be receiving letters of demand, writs or bankruptcy notices from solicitors, debt collectors or creditors. Similarly, in instances where a debtor’s personal guarantees made against business debts are invoked, an agreement may be needed to ensure an individual’s obligations are met.

What is covered in a Personal Insolvency Agreement?

Drafted as a form of deed, the agreement is required to specify certain terms that include:

• Conditions required for the agreement to take effect and to be terminated
• The nomination of a Registered Trustee to administer the agreement
• Any income of the debtor that is available to discharge their debts
• Any properties owned by the debtor that are available to discharge their debts and how such properties will be dealt with
• Whether antecedent transactions can be pursued by the Registered Trustee
• The extent to which the debtor is released of their debts.

What results from a Personal Insolvency Agreement?

A Personal Insolvency Agreement’s main objective is to help individual debtors overcome their debt related issues and eliminate their outstanding debt obligations. Creditors also benefit from these arrangements, as creditors are more likely to collecting larger dividends in faster time than what would generally occur under bankruptcy proceedings. Although the Agreement is enforceable against all parties, it still maintains enough flexibility to allow each party to come to a mutually agreeable outcome.

When a Registered Trustee is appointed to administer a Personal Insolvency Agreement, creditors are prevented from starting or continuing additional debt collection procedures until they decide whether to sign the Agreement.  Once the Registered Trustee has looked into the debtor’s situation and the conditions of the Personal Insolvency Agreement, voting on the Agreement by creditors is undertaken.

Creditors executing the Personal Insolvency Agreement will allow the debtor to avoid restrictions that result from bankruptcy. In addition, the Debtor will have a lessened impact on their credit score, enabling them to continue life free with their debts resolved.

Hamilton Murphy can help with a Personal Insolvency Agreement

An individual is unable to propose a Personal Insolvency Agreement without appointing a Registered Trustee. Following appointment, Hamilton Murphy will conduction investigations, report to creditors on a Debtor’s behalf, and build a proposal that returns maximum benefit to all parties.

During all steps of administering a Personal Insolvency Agreement, Hamilton Murphy provide tailored professional guidance and support. Our years of experience in personal insolvency ensures all parties are treated with respect, while we strive to lift the unnecessary stresses associated with insolvency proceedings.

Informal arrangements can also be a solution for some individuals to help manage and resolve their debts. An informal debt agreement is a customised payment schedule that is agreed to between an individual with debts and their creditors.

In most cases, interest is frozen and debts are settled within a period of 3 to 5 years. As the agreement is not legally binding, it does not lead to being listed on the National Personal Insolvency Register. There also aren’t any restrictions imposed on the individual’s homeowner status, income, travel or ability to be a director of a company.

After establishing an individual’s suitability to enter into an informal debt agreement, Hamilton Murphy would assess the individual’s personal financial situation to determine what is affordable for them. Negotiations are conducted directly with creditors on the individual’s behalf, before an informal debt agreement is drafted to be presented to creditors.

For more information on our personal insolvency services and debt agreements, or to arrange a confidential discussion, contact our team.