Debt Agreement Service Newsletter March 2008

Secured Creditors Choice to Participate in Dividends
Secured creditors with a shortfall (ie. debt less the value of security) must be paid a dividend in a debt agreement unless they choose not to. Debt agreement administrators have no discretion to include them in the expected dividend; it is the creditors right to choose.

The practice about secured creditor debts was sent to you in August 2007. If you need a copy, please contact Andrea Anderson on 07 3360 5434.

There are two options for debtors and administrators:

Administrators have an agreed position with each secured creditor as to how they wish to exercise their choice for all debt agreement proposals; or
Administrators must determine with each secured creditor in each individual case whether they wish to participate in a dividend for any shortfall or rely on payments from the debtor until the secured item is repossessed and they receive dividends on the loss.

Proposals where administrators make a unilateral decision to exclude the estimated shortfall on the secured debt with the secured creditor may not be accepted. This delays consideration of the debt agreement proposal and delays the debtor gaining relief from their debts.

As part of the DAS compliance program, creditors may be contacted by the DAS to ensure that they have had the opportunity to choose to participate in dividends.

Accurate Disclosure of Secured Debts
A recent trend has been identified where debts disclosed as unsecured are shown as secured in the creditor’s Statement of Claim and Voting. This can lead to cancellation of the debt agreement proposal which disadvantages the debtor. Administrators have a duty to scrutinise these debts, assist the debtor and certify they have reasonable grounds to believe that information has been accurately disclosed on the proposal.

Correct Creditor Contact Details
Delays in creditors receiving debt agreement proposals are experienced when incorrect creditor contact details are listed on the Explanatory Statement and Statement of Affairs. Debt agreement administrators should ensure the documentation can be sent to creditors for voting in a timely manner by ensuring correct creditor details are listed.

Proposals to Terminate a Debt Agreement
The Termination Proposal form should be used by all parties who propose a termination. It was designed in consultation with you to provide the information needed to make a decision in a clear and concise way. This will reduce the need for creditors to contact administrators during the voting period.

For agreements under the new debt agreement system from 1 July the approved form must be used. The approved form is available on the ITSA internet site www.itsa.gov.au

Completed Documents must be sighted when signed by Debtor
The integrity of the information in the documents must be maintained and not undermined by administrators lodging ‘replacement pages’.

If a debtor wishes to alter a Debt Agreement Proposal, Explanatory Statement or Statement of Affairs, they must lodge a fresh document. It is obvious that a replacement page with an alteration cannot be accepted from an administrator.

Undisclosed creditors
Creditors and administrators should notify the DAS immediately when undisclosed debts are identified during the life of a debt agreement. This ensures all creditor details are correct to send reports and allows the DAS to consider non-disclosure of debts in the voting period.

An undisclosed creditor is an affected creditor and is bound by the voting result of the proposal even though they were not able to vote on the proposal. For debt agreements made from 1 July 2007 debts are frozen from the date on which the debtor's proposal was accepted for processing and provide for an undisclosed creditor to participate in the debt agreement dividends without the need for a variation to the agreement. All provable debts rank equally and are to be paid proportionally. Administrators should notify all creditors of the impact of the undisclosed creditors on the percentage return.

DAS Electronic Reports
The DAS acknowledge recent delays and errors with our IT reporting system. We appreciate your patience throughout this period. We are working to re-write the current system to provide a more stable and reliable reporting platform.

Full-time Operations Manager in DAS
We are pleased to tell you that Vanessa Goodey has been appointed Deputy Official Receiver to work full-time on operational matters in the DAS. Creditors and administrators will benefit from Vanessa being available to guide and assist on practice and procedure. Vanessa welcomes your comments and suggestions and can be contacted on 07 3360 5435.

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, Operations Manager on (07) 3360 5435. Please continue to direct your queries on individual matters to the DAS teams in Perth and Brisbane.

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

OFFICE ADDRESS: Level 12, Durack Centre, 263 Adelaide Terrace, PERTH WA 6000 / Level 16, 340 Adelaide Street, BRISBANE QLD 4000
POSTAL ADDRESS: GPO Box H536, PERTH WA 6841 / PO Box 10443 ADELAIDE STREET, BRISBANE QLD 4000
TELEPHONE: 1300 364 785 FACSIMILE: (08) 9268 1218 / (07) 3360 5494
EMAIL itsa.wa.da@itsa.gov.au / itsa.qld.da@itsa.gov.au INTERNET: www.itsa.gov.au
OFFICES IN ADELAIDE BRISBANE CANBERRA HOBART MELBOURNE PERTH SYDNEY TOWNSVILLE

	Page Last Updated: 02/20/2009 Contacts \| Enquiry/Feedback/Complaint \| Privacy Policy \| Disclaimer & Copyright