What You Need to Know About Personal Insolvency Agreement

Much like debt agreement that gives you the option to lump all unsecured debts altogether into one agreement, Personal Insolvency Agreement (PIA) also combines all your debts into one single package. With this agreement, any interest on debts will be frozen, and the amount of money you need to pay to your creditors is only based on how much you can afford, with remainder written off. Also, you will be protected from lawsuits or any legal actions from your creditors once this agreement is in place. Read on to know more about what is a personal insolvency agreement.
what is a personal insolvency agreement
In Simpler Terms
So to clarify the question what is a personal insolvency agreement, the PIA is an agreement the debtors and creditors can reach on if the former can no longer pay his debt. Only those who have struggled with paying debts can request for this agreement. The two parties can then come up with an agreed amount and a period of time (usually ranges from 3 to 5 years). In most cases, debtors can settle their debts with less than the amount of their original debt. Here are more important features of a personal insolvency agreement you need to know. check out Debt Mediators
This agreement is regulated under the Bankruptcy Act, making it a formal agreement that should be supervised by the Registered Trustee. Many people mistake PIA as bankruptcy since it is filled under bankruptcy, but the truth is, it is a legal alternative to the bankruptcy, which often times causes trouble as it stays in credit history for quite a long time.
PIA is for debtors who have need meet the criteria for debt management, but also don’t want to file bankruptcy. This agreement doesn’t include upper limits on income, assets, or debts, making them the best alternative out there for high-income earners.
Who is Eligible?
Most people who ask ‘what is a personal insolvency agreement’ also ask if they’re eligible. Well, to be qualified for this agreement, you need to fall in either one of these three categories:
  • All your assets included, does it reach $108,162.60?
  • Are you in debt of more than $108,162.60 unsecured debt?
  • Does your weekly income reach $1560.03 (after taxes)
If have you answered yes to the questions above, then you are eligible to apply for the petition.
The Process
Those who haven’t heard about personal insolvency agreement ask ‘what is personal insolvency agreement?’ and how does it differ to debt agreement? Who eligible for this process? Here are some quick answers to these questions.
To set up for this agreement, you need to find a Controlling Trustee. To appoint a trustee, one should sign the 188 Authority. The trustee should be a Registered Bankruptcy Trustee. A solicitor can also act as a Controlling Trustee.
After that, the Trustee will then conduct an investigation in all your financial affairs, and will then ready the report to your creditors. Report creditors will summarize the current financial status (this includes assets and liabilities) and the debtor’s proposed PIA. The Trustee will then come up with his opinion on the proposed PIA and recommend it to the creditor, whether the latter is interested or not. Typically, they also make a proposal if the solution gives creditors better outcome compared to filing for bankruptcy.
The trustee will then meet with the creditor within 25 business days since being appointed. In the meeting, the creditors will make their vote on your proposal. At least 75 of the creditors must approve it, and 50% of your creditors. Say for example you have a total of $100,000 in debt for five creditors (all participated at the meeting), then you will be asked to support at least three creditors with a combined payment of more than $75,000. Meeting all these criteria with all creditors (whether they voted in favor of your proposal or not), will be bound by PIA.

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