Are you worried about personal liability because of personal guarantees you provided to suppliers to your company or even to the bank?
If so, you can consider bankruptcy. However, it is often better for an insolvent person to consider proposing a Personal Insolvency Agreement, or PIA, to their creditors.
This can be done under Part X of the Bankruptcy Act. It can be entered into by debtors in order to avoid bankruptcy, or as a means of being discharged from bankruptcy. A PIA allows a debtor to come to an agreement with their creditors whereby they are released from their debts. The benefit to the creditors under a Personal Insolvency Agreement is that assets are normally made available to them which would not be the case if the person were declared bankrupt. Such agreements provide the potential for a greater return to creditors.
At Restructuring Works we spend a lot of time advising directors about their personal financial position. We do that because it is of no use to save a director’s company if that director has to become bankrupt and looses the company anyway.
So if you are concerned about personal liability then CALL US NOW for CONFIDENTIAL FREE ADVICE on how to protect your personal financial position.
If you’d like to learn more about personal insolvency agreements then read on.
The commencement of a PIA is brought about by the debtor executing a Section 188 Authority, which has the effect of passing control of their assets to a Controlling Trustee. A Controlling Trustee can either be a Solicitor or a Registered Trustee in Bankruptcy.
In order to enter into a PIA, a special resolution is required to be passed by a majority in number, and at least three quarters in value of the creditors present, in person or by proxy, at a meeting of creditors.
The number of PIAs entered into in Australia is not large. This is because many creditors would rather a debtor become bankrupt than accept what is often a small payout. In recent years, the legislator has introduced a number of provisions to try and overcome some of the perceived deficiencies of the process. Despite the new requirements under Part X, personal insolvency agreements remain out of favour.
