Personal Insolvency Agreements in Australia (Part X): How a PIA Works

A personal insolvency agreement (PIA) under Part X of the Bankruptcy Act 1966 (Cth) is a legally binding deed between an insolvent debtor and their creditors that settles debts without the debtor becoming bankrupt, arranged through a controlling trustee and decided by a creditors' special resolution, with no debt, asset, or income threshold to qualify.

This page covers what a PIA is, the controlling trustee's authority, how creditors decide it, and why it carries no eligibility ceiling. A Part IX debt agreement, covered on debt agreements, has income, property, and debt caps a PIA doesn't, and is generally cheaper and faster to set up. For what happens if you're made bankrupt instead, see how bankruptcy works and the consequences of bankruptcy. Start at the bankruptcy hub to compare all three formal options.

What a personal insolvency agreement is

Section 188A of the Bankruptcy Act defines a PIA as a deed, entered into under Part X, that identifies the debtor's property and income available to creditors, sets out how it's distributed, states the extent of any release from provable debts, sets conditions for the agreement's operation and termination, says whether the Act's antecedent-transactions clawback provisions apply, and appoints a trustee. Unlike bankruptcy, a PIA doesn't sequestrate the debtor's estate, and unlike a Part IX debt agreement, it can pay different classes of creditors at different rates or assign specific property, giving it more structural flexibility than either alternative.

The controlling trustee and section 188 authority

A debtor who wants Part X to apply, without a sequestration order, signs an authority under section 188 naming a registered trustee, a solicitor, or the Official Trustee as controlling trustee, provided the debtor meets an Australian-connection test (personal presence, residence, a dwelling or place of business in Australia, or carrying on business here). The authority isn't effective until the nominated person consents in writing, it can't be revoked by the debtor once effective, and the debtor can't give a new authority within 6 months of an earlier one without the Court's leave.

Once effective, the debtor's property becomes subject to control under Division 2, not vested in the trustee the way a bankruptcy sequestration order works. The debtor can't deal with their property without the controlling trustee's consent and must comply with the trustee's directions; breaching this carries up to 12 months' imprisonment. A charge over the debtor's unsecured debts arises automatically in the controlling trustee's favour, and the trustee is entitled to be indemnified for their costs and remuneration, secured by a lien. Control ends when creditors resolve to release the property, when a PIA is executed following a special resolution, after 4 months from the authority taking effect, if the Court releases the property, or if the debtor becomes bankrupt or dies.

The creditors' meeting and the special resolution

The controlling trustee must call a creditors' meeting under Division 2. At that meeting, creditors decide by special resolution whether to release the property back to the debtor, require the debtor to execute a PIA on specified terms, or require the debtor to present a debtor's petition within 7 days, under section 204. AFSA states the special resolution threshold as a majority in number and at least 75% in value of the voting creditors, citing section 204(1); the Act's own text of section 204 doesn't print that percentage itself, it's delegated to the Insolvency Practice Rules, so this figure should be attributed to AFSA's guidance alongside section 204 rather than to section 204 alone.

If creditors approve a PIA, it must be executed within 21 days of the resolution, a deadline AFSA attributes to section 216(1). If they don't, control of the property either returns to the debtor or the debtor must present a bankruptcy petition within 7 days, depending on what the resolution says.

No eligibility thresholds

A PIA carries no debt, asset, or income ceiling, confirmed three separate ways: a full-text search of the Act's Part X provisions turns up no dollar figure or threshold language anywhere in it; AFSA's own side-by-side comparison table marks income, asset, and debt thresholds as not applicable to a PIA, unlike a debt agreement; and AFSA's PIA overview page states directly that there are no debt, asset, or income limits. The genuine conditions that do apply are different in kind: the debtor can't have proposed another PIA in the previous 6 months, must meet the Australian-connection test described above, and, if they execute a PIA and don't fully comply with its terms, is disqualified from managing a corporation under section 206B(4) of the Corporations Act 2001, the same restriction that applies to an undischarged bankrupt under section 206B(3).

Cost, complexity, and fees

AFSA's own guidance is direct about why PIAs are less common than debt agreements: setting one up costs more, because of the investigations and reporting a controlling trustee has to complete in a short window before the creditors' meeting. This page doesn't have a sourced debtor profile for who typically uses a PIA; AFSA hasn't published that breakdown, so this stays a cost-and-complexity contrast rather than a claim about who ends up using one.

On AFSA's fee schedule, processing a PIA document costs $240, and advertising the creditors' meeting on AFSA's website carries a separate $260 cost-recovery fee. Both are AFSA charges only; the controlling trustee's own fees and the antecedent-transaction investigation work are additional and not fixed by AFSA's schedule.