A binding alternative to bankruptcy
A PIA accepted by the required majority of creditors binds all notified creditors — including those who voted against it.
Explainer
Personal insolvency agreements: what creditors need to know
A Personal Insolvency Agreement (PIA) allows an individual debtor to propose a binding arrangement with their creditors outside formal bankruptcy. For creditors, understanding what a PIA means for your debt is critical to protecting your recovery.
A Personal Insolvency Agreement (PIA) — also called a Part X arrangement, after Part X of the Bankruptcy Act 1966 (Cth) — is a mechanism that allows an individual who is unable or unwilling to pay their debts to propose a binding arrangement with their creditors as an alternative to bankruptcy. If accepted by the required majority of creditors, the PIA binds all creditors who were given notice of the proposal, including those who voted against it.
For a commercial creditor owed money by an individual debtor — whether that individual is the sole trader who owes the debt or a guarantor who became personally liable when a company failed — a PIA proposal changes the recovery calculus significantly.
How we help
Recovery tailored to how you get paid
Creditors vote at a meeting
The trustee of the debtor's property (a registered trustee in bankruptcy) calls a meeting of creditors. The required majority to pass is a majority in number representing 75% in value.
Compare to bankruptcy
The key question for creditors is whether the PIA offers a better recovery than bankruptcy — the amount available to creditors in each case should be compared carefully.
Vote informed — the PIA is binding if passed
Your vote at the creditors' meeting determines whether you are bound by the proposed terms.
Common questions
Frequently asked questions
Can I reject a PIA and pursue bankruptcy instead?
You can vote against the PIA at the creditors' meeting. If the required majority of creditors also vote against, the PIA fails and the debtor may present their own petition for bankruptcy or creditors may proceed with a sequestration order.
What happens to my claim if the PIA is accepted?
You are bound by the PIA terms. You cannot commence or continue legal proceedings outside the PIA framework against the debtor in respect of the debt covered by the agreement.
What is the required majority to pass a PIA?
A special resolution — a majority in number of the creditors present and voting who together represent at least 75% in value of those present and voting.
Do I need to lodge a proof of debt?
Yes — the trustee will set a deadline for lodging proofs of debt. Missing the deadline risks exclusion from any distribution under the PIA.
Get started
Individual debtor proposing a PIA?
Talk to Merion about what your options are — the first conversation is free.