Insolvency & Bankruptcy Law - What is Part IX and Part X under the Bankruptcy Act 1966

Date: May 10, 2010

Authors: Pheba Netto LL.B. (Hons)

Part IX and Part X agreements under the Bankruptcy Act 1966 enable debtors to present creditors with proposals of settling debts. The payments are less than the amount of the debt itself and are paid in full and final settlement of the entire debt.

The arrangements under Part IX and Part X provide relief for the Debtor from immediate full settlement of the debt. The arrangements under Part IX and Part X also provide an opportunity to Debtors to avoid Bankruptcy whilst the creditors obtain a more timely settlement of debts. At the same time, when Bankruptcy is commenced the creditor may after a lengthy process discover that the Bankrupt does not have any assets or the capacity to settle the debt.

In a Part IX or Part X agreement, debtors will inform creditors of their financial capabilities to give the creditors sufficient information to consider the proposal for settlement by the debtor.

A Part IX is referred to as the Debt Agreement while a Part X refers to a Personal Insolvency Agreement. Under the Part IX the Debtor incurs no cost unlike the Part X where the Debtor may well incur significant cost. Another difference between Part IX and Part X is that there are several requirements as to income, assets and liabilities that determine whether a debtor can enter into a Debt Agreement under Part IX.

Part IX are simple and legally binding with the creditor. In this process one enters into a debt agreement with their creditors. The proposals that are suggested in these agreements include reducing your payable debt, putting a stop to payments, the transfer of property as debt payment and the periodic payment of debt through your income.

A Part IX can be proposed by a debtor who has -

  1. Not been bankrupt, utilised a debt agreement or given an authority under section 188 of the Bankruptcy Act in the last 10 years;
  2. After tax income of less than $66,284.40;
  3. Unsecured debts of less than $88,379.20;
  4. Property that would be divisible among creditors if the debtor were bankrupt  valued at less than $88,379.20.

Meanwhile under a Part X the debtor makes a proposal to their creditors which is voted upon at a formal meeting. Once accepted, the proposal is binding on the debtor and all their creditors in respect of their unsecured and provable debts. It enables the debtor and their creditors to come to a mutually agreed compromise in a relatively simple way without reference to the lengthy court proceedings.

As an alternative to Bankruptcy it may be worthwhile to consider the benefits of a Part IX or Part X and at LAC Lawyers you can be sure you will receive the advise that helps you clear your debts in a timely manner and in a manner that would have the least long term effects on your financial standing.

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