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A personal insolvency agreement (PIA) releases you from most of your unsecured debts once you complete your obligations under the agreement. However, you may need to pay certain types of debts.
An unsecured debt is not tied to specific property like a house or car.
Unsecured debts can include:
- credit and store cards
- unsecured personal loans and pay day loans
- gas, electricity, phone and internet bills
- overdrawn bank accounts and unpaid rent
- medical, legal & accounting fees.
Creditors may be able to pursue you for the following debts:
- debts you incur by fraud
- debts under a maintenance agreement or order
- court-ordered fines
- HELP debts.
In some cases, a PIA doesn’t release you from a debt, even when your obligations are complete. This means the creditor can still pursue you for any debt owing after the agreement ends.
For any release to take place, your PIA must provide for your release from all provable debts. You should speak to your trustee about including a release clause in your PIA.
Debts covered by a PIA are the same as those in bankruptcy. The debt comparison table shows which unsecured debts bankruptcy (and a PIA) will cover.
Your PIA may not release you from secured debts. A secured debt is tied to specific property, like a house. The creditor has the right to repossess property you put up as security if you don’t make your repayments.
Your trustee must contact your secured creditors to discuss your intentions with the debt. If you’re unable to maintain the payments, you may be able to surrender the goods.
Some examples are:
- mortgage (house is security)
- car loan (car is security)
- hire purchase or rent to buy (eg. furniture or electronics as security).
A joint debt is a debt you share with another person. You can include them in an agreement, however a creditor can still pursue the other person for the debt. If both people are in a PIA, you should both include the debt in your paperwork.
You can include Australian Taxation Office (ATO) debts in your agreement. However, the ATO can keep your tax refunds if you owe the Commonwealth a debt.