A Personal Insolvency Agreement (PIA) under Part X of the Bankruptcy Act is a flexible way for an individual to come to an agreement with their creditors to settle debts without becoming bankrupt.
Personal Insolvency Agreement
A PIA may involve:
- a lump sum payment to creditors via the trustee either from the debtor’s own money or money from a third party or parties (for example, from family or friends);
- an assignment to the trustee of property to be sold, with the net proceeds distributed to creditors or the payment of the sale proceeds of the property paid to the trustee for distribution to the creditors;
- periodic payments to the trustee to be distributed to creditors;
- any combination of the above.
Except with leave of the Court, an individual who enters into a PIA is precluded from managing a corporation until compliance with all of the terms of the agreement has been satisfied. To limit the period of ineligibility, an individual may therefore opt to put forward a proposal that can be accepted and complied with in a short term.
For the proposal to be accepted, it must be passed by a special resolution at a meeting of creditors. That is, a majority in number and at least 75 per cent in debt value of the voting creditors must vote in favour. It must be noted that there is no guarantee that creditors will accept the proposal.