Part X Debt Agreement – Avoiding Bankruptcy

Part X Arrangements – Avoiding Bankruptcy!

Alternative arrangements into which a debtor may enter with creditors so as to avoid bankruptcy is possible under the Bankruptcy Act.

A part X arrangement is achieved when:

1. A debtor signs a section 188 authority in favour of a Solicitor or trustee.

2. The property will be controlled by the Trustee of the Solicitor.

3. The Controlling trustee sends the creditors a report on the debtor’s financial affairs.

4. An opinion is created by the trustee whether the creditor’s interests would be better served by accepting the proposal.

5. A Statement about the possible resolution at the Creditors meeting is prepared by the managing trustee.

6. A meeting is called with the creditors at which point a proposal made by the debtor.

7. The proposed arrangement must be approved by special resolution, that is, by majority in number and at least 75% in value of the creditors voting at the meeting.

The options for a creditor under a Part X arrangement are as follows:

1. Deed of assignment whereby a debtor assigns all divisible property for the benefit of the creditors.

2. A composition pursuant to which creditors agree to accept either repayment over time by installments or part payment in full satisfaction.

3. A deed of arrangement which allows a debtor to repay debts, whether in whole or in part and which does not fall under the preceding two categories.

The advantages for a debtor under a Part X arrangement are as follows:

1. Avoid the stigma of bankruptcy.

2. Avoid high costs of court proceedings.

3. Avoid the publicity as court proceedings are in the public domain and can be accessed by any person.

4. Avoiding the limitations imposed on undischarged and discharged bankrupts.

5. With some exceptions acquired property acquired after the part X arrangement is not affected.

6. The Debtor is not required to make contributions from income to creditors.

7. There are limitations on the extent to which financial affairs are examined.

8. Debtor’s exposure to criminal prosecution may be less.

Should you have any questions, call the Insolvency Professionals for an obligation free chat.