Personal Insolvency Agreement (PIA)

A Personal Insolvency Agreement (PIA), also known as Part X (10), is a legally binding agreement between an individual and their creditors to settle debts without declaring bankruptcy. It involves the appointment of a trustee who takes control of the individual’s property to make an offer to the creditors, which could be in the form of instalments or a lump sum.

A PIA covers most unsecured debts, which may include credit and store cards, unsecured personal loans, utility bills, overdrawn accounts, and unpaid rent. It does not typically release secured debts like mortgages or car loans, and certain debts like court-ordered fines and HELP debts are not covered. Creditors may still pursue you for debts incurred through fraud or under maintenance agreements.

Entering a PIA is considered an act of bankruptcy and can have serious implications, such as:

• Permanent record on the National Personal Insolvency Index (NPII).
• Impact on credit file for up to 5 years or longer.
• Restrictions on dealing with property and managing corporations until the agreement terms are fulfilled.
• Requirement to assist the trustee by providing necessary information and documentation.

The duration of a PIA depends on the terms negotiated with the trustee and creditors. It generally lasts until the trustee has made the final payment to the creditors.

After a PIA ends, you are typically released from the debts covered by the agreement, provided all obligations have been met and the agreement included a release clause. However, creditors can still pursue any remaining debts not covered by the agreement.

There are no specific debt, asset, or income limits for entering a PIA. It is available to individuals who wish to avoid bankruptcy and can negotiate an agreement with their creditors through a trustee.

Benefits of a PIA can include:

• Avoidance of bankruptcy and its associated restrictions, such as on travel and operating a certain business.
• Possibility to retain assets, unlike in bankruptcy where unprotected assets can be sold.
• No requirement for income contributions, which are mandatory in bankruptcy when exceeding the prescribed threshold.
• Flexibility in settling debts, potentially allowing for payments in instalments or a lump sum.