Frequently Asked Questions
You need to check the relevant legislation in your State and Territory, as the rules are different in each jurisdiction.
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What is a debt agreement?
- A debt agreement or part IX agreement is an agreement that binds you and your creditors and represents an alternative to bankruptcy for those with unmanageable debt.
- A debt agreement allows for your release from your debts when you satisfy all obligations including all payments under the agreement. The terms may require:
- periodic payments from your income;
- postponement of payments for a certain amount of time;
- asset sales; or
- a lump sum payment to creditors.
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Can I propose a debt agreement?
- You are able to propose a debt agreement if you:
- are insolvent and are therefore unable to pay your debts as they fall due;
- have not been bankrupt, entered into a debt agreement or appointed a controlling trustee in the last 10 years; and
- have unsecured debts, assets and an after-tax income for the next 12 months all less than the specified limits.
- It is important to note that proposing a debt agreement is an act of bankruptcy.
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What is a Personal Insolvency Agreement (PIA)?
- A Personal Insolvency Agreement (PIA) allows you to come to a flexible arrangement with your creditors regarding your debts. It enables you to avoid bankruptcy.
- A PIA may involve one or more of the following:
- payments to creditors from your own money or the money of others such as family or friends;
- the transfer or payment of sale proceeds of assets to creditors; or
- a payment arrangement with your creditors that may include a postponement of repayments.
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Can I propose a Personal Insolvency Agreement (PIA)?
- Yes. You can propose a Personal Insolvency Agreement (PIA) if:
- you are insolvent and are therefore unable to pay your debts as they fall due; and
- you reside in Australia or have an Australian connection for example you carry on business in Australia.
- You can use our LegalPlan™ membership Fixed-Fee Quote service to call for tenders from experienced lawyers who may be able to assist you with your proposal.
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Can my application for voluntary bankruptcy be rejected?
- Yes. In a number of situations your application can be rejected. This can include where:
- it appears from the information you have provided that you are probably able to pay your debts but are simply unwilling to do so; and
- you have been bankrupt previously.
- If you have any concerns you can use our free and anonymous Ask a Lawyer service to get information specific to your situation.
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How much do I need to owe before I can go bankrupt?
- You can become bankrupt voluntarily by way of debtor’s petition owing any amount. There is no minimum amount.
- Your request to be made bankrupt may be rejected in certain circumstances including if it appears you are able to pay your debts.
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What should I do if I have been made bankrupt by one of my creditors?
- It is important that you contact your trustee. If you don’t know who your trustee is you should contact the Australian Financial Security Authority (AFSA) and quote the court reference number. You should be able to find this number on your sequestration order.
- Your trustee will give you information on the bankruptcy process and can answer any queries you may have.
- You must assist your trustee and provide them with information when requested to do so. Failure to cooperate with your trustee is an offence.
- Shortly after being notified of your bankruptcy you are required to complete and file a statement of affairs form. This will usually be within 14 days.
- If you want legal advice you can use our Phone a Lawyer service to request a preliminary legal consultation with a private lawyer who may agree to assist you.
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Can I leave the country if I am bankrupt?
- You can only travel overseas with the prior written consent of your trustee.
- Your trustee will only give you permission if they are satisfied you have genuine reasons to leave the country such as you are required to leave for work.
- If your trustee gives you permission to travel overseas they may impose conditions relating to the period of your travel or the date you must return to Australia among other things.
- Your trustee could deny you permission to travel if:
- you have failed to fulfil all of your obligations for example failing to file your statement of affairs;
- you are needed in the country to assist your trustee with the bankruptcy administration; or
- your trustee has not finalised their investigations.
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Is there any difference between an involuntary and a voluntary bankruptcy?
- A voluntary bankruptcy is commenced by debtor’s petition.
- An involuntary bankruptcy is commenced by creditor’s petition.
- The outcome and consequences are the same regardless of whether you are made bankrupt on your own initiative or that of a creditor.
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