How to Set Up A Part IX

Preparing a Proposal

In order to prepare and carry out the terms of the proposal offered to creditors, debtors must gain consent from an administrator. Generally this is from a registered debt agreement administrator. This may also be an unregistered administrator, friend or associate of the debtor, however this person needs to satisfy ITSA’s eligibility test. The service provided by an administrator usually requires payment of a fee.

Alternatively, debtors may wish to self-administer their own debt agreement. If required, assistance in putting together a proposal and completing the required forms can be obtained from a financial counsellor. ITSA can also provide limited assistance.

The role of the administrator starts with determining whether the debtor is insolvent and the extent of the debtor’s unmanageable debt. In assisting the debtor to prepare a debt agreement proposal the administrator works with the debtor to establish their circumstances, their household expenses and income for the next year, and decide what the debtor can afford to pay creditors as their best offer.

When creditors accept a debt agreement, administrators must deal with the funds in the manner described in the debt agreement. Their duties extend to ensuring accurate accounts and reporting systems are maintained in order to inform creditors and ITSA of the progress of the agreement. ITSA’s independent Bankruptcy Regulation Branch regulates the practices of registered debt agreement administrators.

A debt agreement proposal needs to be in the approved forms:

Debt Agreement Proposal - identifies the debtor and outlines what the proposal offer is in dollar terms;
Explanatory Statement - informs the creditors about their income, expenses, assets and debts, personal circumstances, household expenses and the reasons for financial difficulty;
Statement of Affairs – sets out in detail their personal information and circumstances, reasons for financial difficulty, sources of income, assets and debts. The completed form is not sent to creditors and is not a public document.

A certificate signed by the administrator must accompany debt agreements lodged by an administrator. A debtor self-administering their own debt agreement does not have to supply a certificate, but must provide ITSA with a signed copy of the prescribed information when lodging their proposal.

Go to Forms for Trustee & Debt Agreement Administrators to access the available forms.

Lodgement of proposals with ITSA

ITSA ensures that the debt agreement proposal satisfies the eligibility criteria and, if accepted for processing, records the proposal on the National Personal Insolvency Index (NPII).

Each creditor is sent an Official Receiver report, a copy of the Debt Agreement Proposal, Explanatory Statement, and a Statement of Claim and Voting. Creditors are asked to vote upon the debtor’s proposal by returning the Statement of Claim and Voting form by the deadline date.

If accepted by a majority in value of creditors who vote, the proposal becomes an agreement. ITSA updates the NPII to show the debtor as being in a debt agreement. After a debt agreement has been accepted, the debtor must comply with the agreement and ensure it is completed by the completion date listed on the proposal.

If a majority of creditors in value vote to reject the proposal or no creditors vote, then the voting outcome is recorded on the NPII. If the debtor withdraws their proposal or the Official Receiver cancels it, ITSA also updates the NPII with this result. Creditors can commence or continue with action to recover their debts. A debtor can submit a new proposal to send to creditors for voting.

Page Last Updated: 10/21/2009
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