Debt Agreement Service Newsletter July 2009

eSolve Phase 3 (debt agreements) Update
Project Manager George Quarmby distributed a paper “Enabling Web Service Access to ITSA Systems for External Clients” to major creditors and administrators. This document will be finalised based on feedback received and distributed by the end of July 2009. An additional paper regarding the requirements for web service access will be released by George at the end of July 2009.

The Debt Agreement Service is currently developing the eSolve Phase 3 (debt agreements) internal requirements with implementation of Phase 3 occurring in March 2010. If you have any questions, feedback or comments on eSolve Phase 3, please contact Vanessa Goodey on 07 3360 5435 or vanessa.goodey@itsa.gov.au

New Debt Agreement Service Forms
New forms have been developed to prepare for the implementation of eSolve Phase 3 (debt agreements) which are due to be released soon. The new forms include:

Debt Agreement Proposal;
Explanatory Statement;
Statement of Affairs;
Proposal to Vary;
Proposal to Terminate; and
Statement of Claim and Voting.

If you have any queries about the forms, please contact Andrea Anderson on 07 3360 5434 or Anneke Browne on 07 3360 5446.

Importance of voting
Too often we are seeing creditors not voting by returning a completed Statement of Claim and Voting (SOCAV). This results in many proposals not becoming agreements. Our analysis shows that perhaps 20-25% of debtors become bankrupt after their proposal is not voted for.
Creditors are encouraged to vote. Returning a completed SOCAV means creditors can –

Have a say on the proposal; and
Inform the debt agreement administrator of the amount of your debt.

Administrators when deciding the amount for dividend purposes need to know the amount claimed on your SOCAV.

Overseas Debts in Debt Agreements
A recent trend is the increase in overseas creditors being listed on debt agreement proposals and questions about whether these debts can be included under the Bankruptcy Act. Section 82 of the Act states all debts and liabilities which are present, future, certain or contingent which exist are provable; this includes debts incurred overseas. All provable debts owing when the proposal is accepted and recorded on the National Personal Insolvency Index must be disclosed by the debtor.

How to disclose estimated mortgage shortfalls
There has been an increase in questions regarding how to disclose the estimated shortfall on a mortgage where the debtor intends to keep the property. Estimated shortfalls on a secured debt are treated in the same manner regardless of the type of security for the loan. The estimated shortfall on a mortgage where the debtor intends to keep the property must be disclosed on the Explanatory Statement as an unsecured debt and will be included in calculating the estimated dividend to creditors. Any estimated shortfall amount will be included in the calculation of the unsecured debt limit. The secured creditor has a choice as to whether they wish to participate in dividends or rely upon the payments from the debtor and this should be clearly explained on the Explanatory Statement.

The secured creditor is entitled to value their security and vote for the estimated unsecured portion of the debt. The secured creditor is entitled to take into account the estimated expenses of repossession and any expenses associated in the subsequent realisation of the asset. This could result in the secured creditor voting for a higher amount of unsecured debt than what the debtor may have disclosed on the documents.

Creditor Security over assets not in the debtor’s name
If the debtor has a debt secured over the title of an asset which is not in the debtor’s name, the total amount of the liability needs to be shown as an unsecured debt. For example if a debt is secured over the parent’s house, the debtor should treat the debt as unsecured.

Client Manager in DAS
Now that the new debt agreement system has been in use for two years, it is time to analyse more closely what improvements can be achieved to the system. Michelle Tilke has been appointed as the Debt Agreement Service Client Manager. Her role will involve analysing the quality of proposals, the voting practices, trends and practices generally that may affect debtors access to the debt agreement system and creditors confidence in it. Michelle will be proactively working with creditors and administrators to achieve improvements within the debt agreement system. Michelle welcomes your comments, suggestions and feedback and can be contacted on 07 3360 5470 or michelle.tilke@itsa.gov.au

How to become an e-creditor
If you would like to become an e-creditor to receive correspondence from the Debt Agreement Service electronically, please contact Michelle Tilke on 07 3360 5470 or michelle.tilke@itsa.gov.au

Feedback
ITSA values the participation of our stakeholders in the debt agreement system. Digby Ross, National Manager of the DAS can be contacted on (07) 3360 5400 and Vanessa Goodey, Assistant National Manager on (07) 3360 5435. Please continue to direct your queries on individual matters to the DAS team.

Do your employees find these newsletters helpful in developing their knowledge?

OFFICE ADDRESS: Level 16, 340 Adelaide Street, BRISBANE QLD 4000
PO Box 10443 ADELAIDE STREET, BRISBANE QLD 4000
TELEPHONE: 1300 364 785 FACSIMILE: (07) 3360 5494
EMAIL: debtagreementservice@itsa.gov.au INTERNET: www.itsa.gov.au
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