A Part X / Part 10 debt agreement is where you can enter into an arrangement with your debt collectors without entering bankruptcy.
Otherwise known as a Personal Insolvency Agreement, people often use these to get relief from their debt obligations. Not only that, but they allow much greater flexibility for the individual.
How Part 10 Debt Agreements work
To enter into a Part 10 Agreement or Personal Insolvency Agreement (they’re the same thing) is sometimes a complex process. Let’s break it down for you:
- You need to be living in Australia or at least have a regular connection with Australia.
- All debtors must be insolvent
- You can’t have proposed any other Personal Insolvency Agreements in the previous 6 months unless the Court has given you permission.
Next you’ll do this:
- Engage a Controlling Trustee
- Prepare a statement of affairs. That is your assets, liabilities and other personal information like where you make your income
- A complete draft version of the agreement where you outline the terms that you’re proposing to your creditors.
These documents will be forwarded tot he Australian Financial Security Authority by the Controlling Trustee. You’ll have to sign a Consent to Act document giving them the power.
Let’s look at some common questions:
Will this affect my credit rating?
Yes – entering into a Personal Insolvency Agreement or Part 10 will negatively affect your credit rating. Fortunately, it’s not as bad as a complete bankruptcy and you do stand a chance of getting a car loan in the future.
Can I lose my house over this?
The only property that is included in the Personal Insolvency Agreement are included and liable for the loss. If you don’t declare your house on the agreement and your creditors are happy with your proposal, then no, you won’t lose your house or be forced on to the streets.
Am I able to still run a business?
Yes – you can make regular income through a business like anyone else. The only exception is that you can’t be a director of a company whilst under the terms of a Part 10 debt agreement. Once the restriction is lifted, then ASIC will give you permission.
Part 10 debt agreements are a viable alternative to complete bankruptcy, provided you’ve exhausted all other options. These are becoming quite popular in Australia.
Have you spoken to the National Debt Helpline? It’s a free service that’s run by the Australian government. You can call them on 1800 007 007 for unbias advice.
You might also wish to reach out to us here at The Debt-Free Community. 🙂