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Creditors
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The materials on this page provide basic information about a creditor’s involvement in the personal insolvency system.
It is not intended to be a substitute for professional advice.
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| How personal insolvency works in Australia |
Debtors with unmanageable debt have three main options to deal with their situation under the Bankruptcy Act:
- Debt Agreements
A binding agreement between a debtor and their creditors where the creditors agree to accept a sum of money which the debtor can afford.
- Personal Insolvency Agreement
A flexible way for a debtor to come to an agreement with their creditors to settle debts without becoming bankrupt. A debtor must be insolvent to propose a PIA.
- Bankruptcy
If a debtor cannot pay their debts or come to a satisfactory agreement with their creditors, a debtor may become bankrupt and receive the protection of the Bankruptcy Act.
You can click on the links above for further information. When a person enters one of the above administration types, this limits the rights of unsecured creditors to recover their debts directly from the debtor.
| What does this mean for me? |
Creditors can also apply to the court to make an individual bankrupt if they can satisfy the court that a debtor owes them money. The process of making a person bankrupt often commences with the issuing of a Bankruptcy Notice to the debtor. Learn more about bankrupting someone
At various stages during the administration process, creditors may be asked to pass resolutions approving or rejecting a course of action proposed by a debtor or a trustee that is administering the debtor’s estate.
Most resolutions must be passed by a majority in value. This means more than 50% of the dollar value owed to creditors who are present personally, by telephone, by attorney or by proxy at a meeting of creditors and are voting on the resolution. Some resolutions require a higher proportion of the dollar value (eg 75%).
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