Today’s topic of discussion is what is a Part ten personal insolvency agreement, and should I take it out?

A Part 10, which is also sometimes referred to as a Part X due to X being the Roman numeral for 10, is a legally binding agreement between an individual and their creditors.

Now, how does this work? An individual who is faced with a great deal of personal debt may investigate if their creditors would be open to accepting a compromise instead of the full payment of the debt. The compromise could involve an amount, payment terms or a combination of the two, or various other potential compromises. For example, if a person has 20 creditors owing them a million dollars, they may present a proposal to the creditors that they be paid 0.30c in the dollar, in equal installments over 12 months. This is obviously not the original payment terms, but it could be a more attractive option for the creditors than the individual declaring bankruptcy.

A Part X personal insolvency agreement is a complex matter and because of this, it can be costly to even present a proposal to creditors so, you will need to have access to a substantial amount of funds that would not typically be available in bankruptcy.

For instance, if someone owns a piece of real estate with equity, it could be taken away by creditors in bankruptcy. However, if the person has a third party, such as a family member, friend, superannuation fund, or other source of funds that would not normally be part of a bankruptcy, and those funds can be used to pay creditors, a personal insolvency agreement or a part time agreement may be a viable option.

In addition, a significant amount of cash must be presented to creditors in order for the proposal to be worthwhile. As a general rule, there are no minimum amounts; however, it can be costly to even make the
proposal, usually starting at around $20,000.

This means that this type of agreement tends to work better for those with higher debts or more access to funds that can resolve their situation.