Debt Agreement Service Newsletter March 2006

In this issue:
Debt Agreement Service
Forums
Abuse of debt agreement system
New IT system benefits you
Provisional quarterly numbers for 2005
Feedback

Issue 1
March 2006

Welcome to our first newsletter. It is being sent to all major creditor contacts and debt agreement administrators. Its aim is to share knowledge about what is happening in ITSA’s Debt Agreement Service.

Debt Agreement Service
The Debt Agreement Service enables transparency in the resources applied to the debt agreement system and greater accountability for performance of the system. This will improve ITSA’s ability to deliver equitable outcomes for debtors and creditors who are parties to debt agreements, and a focus on compliance will ensure a well managed debt agreement system to achieve public confidence in debt agreements as an option for people with unmanageable debt.
The Perth team handles proposal lodged from Western Australia, South Australia, the Northern Territory and Tasmania and the Brisbane office handles proposals lodged from Victoria, New South Wales and Queensland. Responsibility for relationships with individual administrators and compliance related to proposals, variations and terminations rests with the Operations Manager, Bob Siemon, and Compliance Manager, Katrina Woodrow, in Brisbane.

Forums
In July 2005 major creditor organisations met with representatives of the debt agreement industry and the Insolvency Trustee Service Australia. The following actions were agreed on:

Exception reports Administrators agreed to report to creditors on an exception basis by the end of September with a recommendation to either vary or terminate agreements which are in arrears. Creditors agreed to contact the administrators when an exception report is not provided. Recently creditors have been kept informed by administrators providing exception reports. However all administrators need to adopt exception reporting as a standard practice.
Secured debts ITSA agreed publish a practice statement which explains the position of secured creditors and the position of secured creditors for shortfall amounts on the sale or writing off of a security. This statement has been prepared and is with stakeholders for comment.
Administrators’ fees Administrators agreed to provide a detailed statement to creditors of the fees and services provided and work performed both in the preparation of a debt agreement proposal and in the administration of the debt agreement. ITSA agreed to obtain these statements with a view to publishing them on the ITSA web site. We ask administrators who have not yet provided this information to ITSA to do so as soon as possible.
Differential rates of return Creditors generally expressed a preference for ensuring parity in returns where the term is the same.
Reporting by creditors Creditors agreed to report to ITSA where there is a significant difference between the information contained in the debt agreement proposal and their records. ITSA agreed to assess the report to ascertain whether the matter should be addressed with the administrator, Bankruptcy Regulation Branch or Bankruptcy Fraud Investigation.
‘Excluded’ creditors ITSA agreed to consider at the time of receipt of each debt agreement proposal whether it is ‘in the best interests of creditors’ to accept proposals where a creditor is ‘excluded’, i.e. included in the proposal but receiving payment directly from the debtor.
Debtors being contacted by creditors after proposal or agreement in place Creditors agreed to remind their organisations that the debtor is released from their debts after a debt agreement is in place and should not be pressed for payment. ITSA and administrators agreed to report to the creditor to be addressed instances where debtors continue to be contacted.
Practice on terminations Creditors agreed to obtain a report from administrators on the status of the debt agreement before making a request for termination or variation. ITSA agreed to not process proposals to vary or terminate unless the proposal is accompanied by a status report from the administrator. This will avoid terminations where the debtor is not in arrears.

Abuse of debt agreement system
The importance of ensuring that all creditors are fully disclosed in a Debt Agreement Proposal is demonstrated by a recent application to the court by the ATO. The facts in D.C.T. v Trigo-Contillo [2005] FMCA 1856 (16 December 2005) were that the amount disclosed on the proposal as owing to the ATO was $55,564 when the actual amount owing was $174,551.
The agreement was found to be void. The debtor was made bankrupt by a sequestration order and is subject to investigation by their trustee. The matter was referred to the Bankruptcy Fraud Investigation to consider prosecution for breaches of the Act.

New IT system benefits you
We are implementing a new computer system to improve the service which ITSA provides to clients. During March voting trends will be automatically generated daily for debt agreement administrators and the outcomes of voting will be computer generated and sent electronically on the 27th day to administrators. We are testing and expect a seamless transition when the change is fully implemented with a marked improvement in the service we deliver and minimal disruption to our clients.

Provisional quarterly numbers for 2005
Debt agreements accepted for processing each quarter:

March 2005	June 2005	September 2005	December 2005
954	1057	1137	1068

Feedback
ITSA values the participation of our stakeholders in the debt agreement system. Your comments and suggestions for the DAS are welcomed by Digby Ross, National Manager of the DAS on (07) 33605400 and Bob Siemon, Operational Manager on (07) 33605452. Please continue to direct your queries on individual matters to the DAS teams in Perth and Brisbane.

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