Personal Insolvency Agreements

Personal debts are a common problem in Australian households. The issue has worsened in recent years thanks to increasing cost of living pressures.

Rising spending and inflation caused the average household debt to grow by 7.3% between 2021-22, and the issue has become a serious stressor for many.

But, if you’re struggling with your personal finances, help is available. At Business Savers, we provide advice on Personal Insolvency Agreements (or PIAs), which can assist in getting your debts under control and your financial life back on track.

If you’re being harassed by creditors, struggling to make payments or need to find relief from financial distress, Business Savers is here to help.

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What is a Personal Insolvency Agreement?

A Personal Insolvency Agreement is a legally binding agreement between you and your creditors. Developing a Personal Insolvency Agreement (PIA) is a flexible way to settle your debts with creditors and avoiding bankruptcy.

Under a PIA, a registered Trustee is appointed to take control of your property and deal with creditors. The Trustee will assess your situation and propose an agreement that allows you to repay some – or all – of your debts to creditors. Repayments may be made as a lump sum, or they may be made in instalments.

Entering into a PIA with your creditors has serious, lasting consequences. It should be considered a last resort before declaring bankruptcy, and you should only consider a PIA if you are ineligible for a Part 9 Debt Agreement.

What Debts Does a Personal Insolvency Agreement Cover?

Your Personal Insolvency Agreement releases you from most types of unsecured debts. Unsecured debts are not tied to property, such as a house or a car. These include:

  • Credit cards
  • Personal loans
  • Payday loans
  • Utilities bills
  • Medical and legal fees
  • Unpaid rent
  • Tax debts to the ATO

Your PIA won’t release you from the following debts:

  • Child support and spousal maintenance
  • Court-ordered fines
  • HECS/HELP debts

It’s unlikely that your PIA will release you from secured debts. A secured debt is any liability that’s tied to a property, such as your car loan or the mortgage over your house. In these cases, the creditor has the right to repossess the property separately, rather than allowing it to be included in your PIA.

You’ll need to consult your Trustee if you would like to keep your house and/or car while subject to a PIA. If you are able to continue making payments against these debts, your Trustee may be able to negotiate with the creditor to keep the property.

You can read more about which debts are included in Debt Agreements on the AFSA website.

What are the benefits of a Personal Insolvency Agreement?

While legally binding, a Personal Insolvency Agreement provides some flexibility as there is freedom to change the terms where necessary during the course of the process. 

Other benefits of a Personal Insolvency Agreement include:

  • avoids the individual becoming bankrupt
  • payments from income are not required unless included in terms of the agreement
  • ability to continue to operate a business if the agreement allows for it
  • ability to retain assets subject to the terms of the agreement
  • no restriction on local or international travel
  • impact on credit rating is less severe than if bankruptcy were to occur

While legally binding, a Personal Insolvency Agreement provides some flexibility as there is freedom to change the terms where necessary during the course of the process. 

The Part X Personal Insolvency Process

Developing a Personal Insolvency Agreement is a relatively straightforward process. There are only a few major steps:

  1. You appoint a controlling Trustee. By signing a Controlling Trustee Authority form, you can appoint an independent Trustee to administer your Personal Insolvency Agreement.
  2. The Trustee investigates your financial situation. Your Trustee takes control of your assets as soon as they are appointed. At this point they will also investigate your finances and liabilities, and they will uncover any assets that can be used to repay creditors.
  3. The Trustee develops your PIA. You will work together with your Trustee to develop a Personal Insolvency Agreement that can be put forward to your creditors.
  4. Creditors vote on the PIA. The Trustee will call a meeting of your creditors within 25 to 30 days of sending your proposal. At the meeting, the creditors will vote to approve the PIA. The PIA is approved if it is supported by the majority of creditors, and if those creditors hold at least 75% of the value of the debts included in the proposal.
  5. The PIA becomes binding. If approved, the terms of your PIA become binding. Creditors can no longer commence or pursue legal action for any debts that are included in the PIA. In return, you need to meet your obligations, such as selling assets or contributing a portion of your income towards the outstanding debts.

You are expected to meet your obligations under the PIA for the life of the agreement. The life of a PIA varies, but most agreements last 3-5 years. Once you have completed your Personal Insolvency Agreement, the remaining debts will be forgiven. If you fail to meet your obligations, your agreement will be terminated and you may proceed to bankruptcy.

The Outcomes of a Part X Personal Insolvency Agreement

Your Personal Insolvency Agreement is designed to release you from most of your unsecured debts. While you’re still required to pay some types of debts (outlined above), this process allows you to get your finances back on track and continue life as normal. However, a PIA carries serious and lasting consequences, including:

  1. Your name and details will appear on the National Personal Insolvency Index (NPII) forever. The NPII is publicly searchable, and this may have an ongoing impact on your life.
  2. Credit reporting agencies will keep a record of your personal insolvency. These details will be kept for 5 years from when the agreement was made, or 5 years from when your obligations are complete, whichever is later. This can seriously affect your ability to obtain new credit.
  3. You will be disqualified from managing a corporation until the terms of your PIA have been satisfied.

These consequences mean that it’s important to seek professional financial advice before appointing a Trustee. A financial adviser will be able to assess your situation and determine whether a PIA will lead to the best outcome for you and your family.

Part X Personal Insolvency Agreements vs Part 9 Debt Agreements

A Part X (also called a Part 10) Personal Insolvency Agreement is the last resort before bankruptcy. You should only consider a Part X agreement if you’re ineligible for a Part IX (also called a Part 9) Debt Agreement.

The two types of agreements work similarly. Under a Part IX or Part X agreement, you agree to repay some (or all) of your debts as an alternative to bankruptcy. However, a Part IX Debt Agreement carries fewer consequences (your listing on the NPII will expire after the agreement is completed), which can make a major difference to your life. 

Unlike a PIA, a Part IX Debt Agreement is subject to debt, property and income limits. These thresholds are updated twice a year. The current thresholds are:


Maximum Amount







If your debts, property or income exceeds these thresholds, you’ll need to consider a Part X Personal Insolvency Agreement. You can view the current Indexed Amounts on the AFSA website.

Explore Personal Insolvency Options with Help from Business Savers

Managing personal insolvency can be a stressful and challenging experience. In the worst case, financial difficulties can lead to bankruptcy, which may have a lasting effect on your financial life. If you are struggling to manage your debts, it’s important to act quickly, and a Personal Insolvency Agreement may be the right solution. Some other alternatives include Business Turnaround Management or Small Business Restructuring.

The team at Business Savers are experts in personal insolvency. As Registered Trustees, we have vast experience managing personal insolvency matters, so we know how to help you navigate your debts. Our team offers personalised advice that’s tailored to suit your situation. Whatever you’re dealing with, we can help you explore your options and develop a Personal Insolvency Agreement that benefits you and your family. You can contact us online to book an appointment, or phone us on 1300 069 155 for a confidential consultation.

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