Your rights as a creditor in a personal insolvency agreement

If you are a creditor in a personal insolvency agreement (PIA), there is some important information you should know. Your rights and responsibilities as a creditor may change. 

A trustee manages the PIA and ensures all parties meet the terms of the agreement. The trustee is also responsible for providing payments to creditors.

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What is a personal insolvency agreement?

It is a binding agreement between you and the person who owes you money (the debtor). Creditors vote whether to accept a proposal from a debtor and, if creditors do accept it, all creditors with provable debts are bound by the agreement. These agreements can be a flexible way for people to settle their debts.

A controlling trustee manages the proposal that is sent to creditors and, if creditors accept it, a registered trustee manages the personal insolvency agreement. See here for contact details of registered trustees.

Receiving a personal insolvency agreement proposal as a creditor

The person who owes money appoints a controlling trustee who manages the process.

The controlling trustee

  • takes control of the person's property
  • puts forward a proposal to creditors
  • prepares a report that compares what you get from the PIA as opposed to the person entering bankruptcy
  • organises a meeting of creditors within 25 working days (except in December when it is 30 days) of their appointment.

At the meeting of creditors, the trustee will ask you to consider and vote on the agreement proposal.

You are able to ask questions of the person who owes you money to help you decide how to vote.
For more information see: About meetings of creditors

For creditors to accept the proposal, the majority of creditors and 75% of the dollar value must vote yes. We call this a special resolution.

How do I vote?

You will need to attend a meeting of creditors.

The controlling trustee sends you the following at least 10 days before the meeting:

  • notice in writing of the date, time and place of the meeting
  • the trustee's report
  • the trustee's statement about resolutions to vote on, and
  • an estimate of the trustee's costs for managing the agreement.

If you would like more information about the proposal, contact the trustee.

If you're unable to attend the creditor's meeting, contact the trustee to discuss if you can:

  • vote by teleconference or
  • appoint a proxy or attorney to vote on your behalf.

If creditors accept the agreement

You must comply with the terms of the agreement.

Creditors must select a trustee to manage the terms of the agreement. This is normally the same person as the controlling trustee, but creditor's can choose another trustee.

If creditors don't accept the agreement

Creditors can, by special resolution vote to either:

  • hand back control from the trustee to the person who owes money or
  • require the person who owes money to present a bankruptcy application within 7 days of the special resolution.

Creditors can also decide to not make a special resolution.

If this happens, the controlling trustee retains control over the persons property until whichever of the following happens sooner:

  • four months pass from the date they appoint the controlling trustee
  • the person becomes bankrupt
  • a court releases the property from the trustee's control or
  • the person dies.

Confirm someone is in a personal insolvency agreement

If you want to confirm someone is in a PIA contact the trustee. If you don’t know who that is, ask the person in the agreement for the trustee’s details.

If you are unable to obtain the trustee details, you may wish to complete a Bankruptcy Register Search.

Can I pursue payment during a personal insolvency agreement?

In most cases, you can no longer pursue the person for the debt, however there are some exceptions.

As an unsecured creditor, you must comply with the terms of the agreement. This applies to you even if you voted no to the agreement proposal.

If you are a secured creditor (meaning your debt is tied to a particular asset - e.g. house or car), the PIA does not affect your rights to deal with the secured goods. You are still able to repossess and sell the goods if the person in the PIA doesn't maintain repayments.

For more information on unsecured debts and whether they are provable and/or extinguished, please see: Creditor’s quick guide - bankruptcy and unsecured debts.

Note: The types of debts that are provable in a personal insolvency agreement are the same as those in bankruptcy.

For more information about how the personal insolvency agreement impacts you as a creditor:

  • contact the trustee
  • seek your own advice from an accountant or solicitor.

For help with varying or terminating (setting aside) a PIA: Official Receiver Practice Statement 4 - 'Setting up a PIA'.