How can you advise individuals facing bankruptcy on the alternative of a Debt Agreement?
A personal insolvency debt agreement can be a flexible way to manage a client’s debt that is out of control, without them entering into bankruptcy. But your advice as a personal insolvency professional is imperative. PIPA is an ideal place for clients to start whether they live in Melbourne, Sydney, Perth, Queensland or Adelaide.
Debt Agreement Administrators
Though debt agreements fall under the umbrella of bankruptcy procedure, they do not cause the individual to register as bankrupt and do not generate a permanent record. There are fees involved, which in many cases amount to being more than 100% of debt owed due to for-profit advisors. As the peak body representing Registered Debt Agreement administrators, PIPA promotes fairness and best practice ensuring debts are managed without unnecessary fees and further hardship.
Debt Agreements in Australia occur in the following stages:
- negotiation to generate a fee within the individuals budget so that they can pay regularly, over a period of time
- Payments are made to a registered administrator, such as PIPA, avoiding further contact with creditors and debt collectors
- Settlement of the debt occurs after payment cycle is complete so that creditors can’t recover the remaining debt owed once the agreement has finalised
PIPAs recent submission to the Attorney General calls for the following reform to debt agreements:
- Increase debt agreement terms from one year to five years
- Increase the income and debt threshold to $250,000
- Enforce mandatory licensing and best practice protocol for debt advisors
- Remove debt agreements from being an act of bankruptcy
- Allow debtor to become bankrupt upon rejection of debt agreement