Are your financial debts and liabilities getting the better of you? Thinking of going into insolvency or bankruptcy but do not know where to begin? It is important to understand that there are many different alternatives available aside from becoming insolvent. As such, there are schemes available that allow you to reach an agreement with your creditors to sort out your debts on the basis that you do not go bankrupt, but that agreement must be supervised according to the law. Essentially, you have three options:

  • Informal arrangement;
  • Part IX Debt Agreement; or
  • Part X Personal Insolvency Agreement.

In this article, we will focus on the Part X Personal Insolvency Agreement, so if you would like more information on informal arrangements or Part IX Debt Agreements, please read “An Alternative to Bankruptcy. What are Part IX Debt Agreements?” article.

As a general rule of thumb, a Personal Insolvency Agreement is for people who earn and owe large sums of money. A Debt Agreement, on the other hand, is a cheaper and simpler process for people who earn and owe less money.

What is the process?

Procedurally, it begins with you signing a section 188 Authority which authorises a registered trustee to call a meeting of creditors to consider your proposal. It is also important to note that the act of signing a section 188 is considered an Act of Bankruptcy because it is only when you are insolvent that you have to deal with your creditors. Realistically, you will have to draw up your proposal and when you sign the section 188, you will have to give the proposal to the trustee to take to the meeting. As such, it is strongly advised that you acquire the assistance of a solicitor and accountant to help you draft up this proposal. Your proposal should be made as soon as possible, while creditors are willing to listen. A document of this importance should demonstrate that creditors will get a better return over other alternatives.

Who can use the Part X Personal Insolvency Agreement?

Anyone who has a territorial connection with Australia can use the Part X Personal Insolvency Agreement. This means you must show you:

  • Are present or ordinarily a resident in Australia;
  • Have a dwelling house or place of business in Australia;
  • Carry on business in Australia either personally or by means of an agent or manager; or
  • Are a member of a firm or partnership carrying on business in Australia by means of a partner, agent or manager.

What then?

After you have signed the section 188 Authority and drawn up a proposal authorising the trustee or solicitor or Official Trustee to call a creditor’s meeting, it cannot be revoked. The effect of signing section 188 is that the person authorised immediately takes control of your property. You must hand in your Statement of Affairs within 14 days of signing and your property remains subject to the control of the nominated person until either:

  • The creditors resolve your debts;
  • The Part X Personal Insolvency Agreement is entered into;
  • 4 months has passed without a Part X Personal Insolvency Agreement;
  • The court releases you;
  • You are declared bankrupt; or
  • You pass away.

After the meeting

Once the creditors have had the meeting and have decided to agree to the Part X Personal Insolvency Agreement, then the proposal becomes a formal agreement and the nominated official draws up the final copy signed by you and by the Controlling Trustee on behalf of the creditors. At this stage, it becomes a legally binding document in terms of the law and it is formally carried out.


The inconvenience and complexity of a Part X Personal Insolvency Agreement is definitely a testing and worrisome time for anyone. If you believe you need to draft up a proposal for your creditors, LegalVision will gladly assist. Give us a call on 1300 544 755.

Lachlan McKnight
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