What is Personal Insolvency?
A personal is considered insolvent when they do not have enough money to service their debts.
A Personal Insolvency Agreement (PIA) is a formal option available to help you deal with unmanageable debt.
A PIA may involve on or more of the following, which will result in creditors being paid in part or in full:
- A lump sum payment to creditors either from your own money or money from third parties (eg. family or friends)
- Transfer of assets to creditors or the payment of the sale proceeds of assets to creditors (this could include deferral of repayments)
- A payment arrangement with creditors (this could include deferral of repayments)
Impacts of entering into a Personal Insolvency Agreement:
- When you appoint a controlling trustee, you commit an ‘act of bankruptcy’. A creditor can use this to apply to court to make you bankrupt.
- Even if your attempt to set up a PIA fails, the appointment of a controlling trustee and the setting up of a PIA will still be recorded on the NPII forever.
- Your details will also appear on a record held by a credit reporting organisation for up to five years – or longer in some circumstances.
- Once you have executed a PIA, you are automatically disqualified from managing a corporation until the terms of the PIA have been complied with.