Part X Arrangement


Part X of the Bankruptcy Act provides a special procedure whereby a debtor enters into an arrangement with his/her creditors and consequently the debtor is released from all his/her debts. The procedure is formalized by a process of Law involving the debtor putting forward a proposal to creditors, a Meeting of Creditors being held and in most situations the execution of a Deed. Formalized arrangements with creditors under Part X of the Bankruptcy Act not only binds the debtor but also creditors and consequently precludes them from taking further legal action against a debtor.


  1. To protect the debtor from having to become bankrupt.
  2. To reduce portions of debt [often large amounts]
  3. To relieve to pressures of constant creditor attacks
  4. To have a formal arrangement that binds creditors
  5. To offer creditors more than would be available to them in bankruptcy


  1. It may substantially reduce and wipe out a large amount of debt
  2. You don’t have to go bankrupt
  3. You can often retain assets and acquire new assets
  4. No restrictions on travel
  5. Fast Relief from creditor actions
  6. You can still conduct business and borrow
  7. Creditors are bound by the arrangement
  8. The debtor is given a fresh start with dignity


  • Since the 1 st of December 2004 the Act has dramatically changed in an attempt to make it more simple and documents more informative.



Part X of the Bankruptcy Act provides a process by which a debtor may make a proposal to their creditors which they consider and vote upon at a formal meeting. It is an alternative to bankruptcy.

Once accepted, the proposal is binding on the debtor and all creditors in respect of their unsecured provable debts. It enables the debtor and creditors to come to a mutually agreed compromise in a relatively simple way without reference to the court. Often allowing the debtor to dramatically reduce his/her debt and either pay the smaller amount over a period of time interest-free or in a lump sum payment.

You are obliged to disclose all your assets to creditors on you Statement of Affairs, and not make a knowingly false statement as penalties do apply.



To initiate action that would lead to any of the above formalized agreements, you can contact Queensland Administration Services, as we are well versed in the procedural aspects of Part X of the Bankruptcy Act.

We can arrange that you sign a Section 188 Authority, which is a document that provides a solicitor [who now becomes the “Controlling Trustee”] with the authority to convene a meeting of your creditors. It should be noted that the signing of a Section 188 Authority is an Act of Bankruptcy, but you are not bankrupt. A proposal by your to extinguish the debts will be determined by them at this meeting.



There are 4 basic steps in setting up an agreement. These are:

  1. appointing a controlling trustee;
  2. calling a meeting of creditors;
  3. the controlling trustee’s report; and
  4. the meeting


Before a debtor can proceed with a Personal Insolvency Agreement to deal with their financial affairs, they need to be provided with:

  1. information about the consequences of entering into a Personal Insolvency Agreement
  2. information about the sources of financial advice and guidance to debtors and creditors who are considering a Personal Insolvency Agreement (Q.A.S. can provide this information – phone 07 55 960499)
  3. a statement to the effect a PIA can be administered by a registered trustee or the Official Trustee in Bankruptcy
  4. a statement to the effect that is an act of bankruptcy if a debtor does any things mentioned under section 40(1)(i) to (m) of the Bankruptcy Act 1966 ie:

– if they sign authority under s188 of the Act giving a controlling trustee certain rights and obligations;
– if a meeting of their creditors is called in pursuance of the s188 authority;
– if without sufficient cause they fail to attend a meeting of their creditors called pursuant to such an authority;
– if having been required by a special resolution of a meeting of their creditors to execute a Personal Insolvency Agreement or to present a debtor’s petition they fail without sufficient cause to:

– comply with the requirements to execute the deed; or

– to present the debtor’s petition within the time specified in the resolution;

     5.as the case may be;
if a personal insolvency agreement executed under Part X is:

– set aside by the court; or


   6. information about the processes of a Part X
7. information about a debtor’s rights and responsibilities under Part X, including the obligation to disclose ALL related entities; and
8. information about a controlling trustee’s obligations to disclose their relationship with the debtor(s)

The information to be provided must be factual and objective to ensure the debtor understands what it will mean to enter into a Personal Insolvency Agreement under Part X.
The debtor also needs to be provided with the Prescribed Information . Before signing any authority under s188, it is important that they read the Prescribed Information and sign an acknowledgement that they have read and understood the contents. There will be instances where a debtor is unable to read the information due to being blind, partially sighted, illiterate, partially illiterate or do not have a good understanding of the English language. In these circumstances, the authority and acknowledgement can be signed by another person if that person signs a statement to the effect:

  1. the debtor is blind, partially sighted, illiterate, partially illiterate or does not have a good understanding of the English language and they have carefully read the material to the debtor; and
  2. in the case of language, they have carefully interpreted the material in a language that both parties understand.


An authority signed by s188 is not effective UNTIL the debtor has provided to the solicitor or trustee a completed Statement of Affairs and a draft Personal Insolvency Agreement outlining how their assets and liabilities are going to be dealt with. This provides clarity about the intentions of the debtor in coming to a resolution about their financial affairs.
With the debtor providing this information up front, it provides the solicitor or trustee who then crystallizes the authority process by giving their consent through signing the s188 authority a basis upon which to undertake preliminary investigations to report more fully to the creditors so they in turn can give due consideration to the proposal being offered by the debtor and make a well rounded commercial decision on the known facts and circumstances.


There are a number of elements that a Personal Insolvency Agreement proposal needs to contain. By detailing these elements, it provides clarity of intention and what will happen in the event of acceptance of the agreement, describes the flexibility in the arrangement being offered and increases the awareness between the debtor and creditors on the areas that are negotiable in order to come to a resolution of the debtor’s financial affairs to a level the creditors are happy to accept.

Although not limited to this information, a Personal Insolvency Agreement proposal needs to contain as a minimum the following content:

  1. details of the property being made available to pay creditors;
  2. how that property will be dealt with;
  3. details of contributions from income if any will be made available to pay creditors;
  4. how the income will be dealt with;
  5. specify the extent to which the debtor will be released from their provable debts;
  6. specify the conditions that need to be met for the PIA to come into operation;
  7. any circumstances, events or triggers upon which the PIA will terminate;
  8. the order in which the proceeds from realising the property will be distributed amongst creditors;
  9. the order in which the income identified (if any) is to be distributed amongst creditors;
  10. specify whether the antecedent transactions (transactions that have taken place that can be overturned) provisions apply to the debtor;
  11. make a provision for a person(s) to become a trustee(s) of the agreement; and
  12. provide for the debtor to execute the agreement, and other instrument to give effect to the conditions of the agreement i.e. transfer/sale of property or contributions from income earned

It is therefore important for debtors to consider carefully what they need to include in a proposal and incorporate the essential elements when drafting a proposal. Queensland Administration can assist.


The signing of the s188 authority is irrevocable and is an act of bankruptcy {this does not mean you are becoming bankrupt). Because it is an act of bankruptcy, the signing of the authority can assist a creditor in any attempts to bankrupt the debtor, in the event the attempt to establish the Part X fails.

The debtor must authorize a registered trustee, a solicitor or the Official Trustee in Bankruptcy, referred to as the Controlling Trustee, to call a meeting of creditors(s 188).

This authorization hands the control of the debtor’s property over to the controlling trustee. This continues until one of the following occurs:

  • – the creditors resolve that the property is no longer subject to control
  • – a Personal Insolvency Agreement is executed by the debtor following the resolution of creditors, at which time the control is transferred to the trustee
  • – a period of four months has elapsed from the time of the authority being accepted
  • – the Court releases the debtor’s property
  • – the debtor becomes a bankrupt or dies

A controlling trustee’s powers to deal with property include the ability to:

  • – take immediate control of the debtor’s property and affairs;
  • – make such enquiries and investigations in connection with the debtor’s affairs as the trustee considers necessary;
  • – carry on the business of the debtor , if in the opinion of the controlling trustee, it will be in the best interests of creditors to do so; and
  • – deal with the debtor’s property in way that will, in the opinion of the controlling trustee, be in the interests of creditors.

In addition, the controlling trustee will be required to:

  • – notify the debtor’s creditors that a s188 authority has been given;
  • – give information about the controlling trustee’s administration to the debtor who reasonably requests it;
  • – ensure the debtor discharges their duties under the Bankruptcy Act; and
  • – give consideration to any offences the debtor may have committed under the Bankruptcy Act and refer them to the relevant authorities..

When the authority becomes effective any Creditor’s petition pending in the court is stayed until one of two events occurs. If at the first meeting of creditors held to consider the Personal Insolvency Agreement creditors pass a special resolution to accept the proposal being offered or the meeting is adjourned.

Where the meeting is adjourned, any Creditor’s petition pending in the court is revived and the debtor can be made bankrupt on that petition.


The debtor, controlling trustee, trustee and creditors all have obligations to disclose relationships and other information.

Debtors when completing their Statement of Affairs need to list their creditors. As a part of this, they need to disclose the relationship they have with each of their related creditors (see definitions below). This provides all parties with knowledge to enable them to make informed decisions, whether further investigations need to be carried out or questions asked.


Once a debtor has read the information about their obligations and responsibilities, signed the acknowledgement from the Prescribed Information booklet, completed their Statement of Affairs, provided a draft Personal Insolvency Agreement proposal and signed an authority with a solicitor or trustee to become their controlling trustee, the controlling trustee has a number of obligations once they sign the authority consenting to act.

Within 2 working days from the date the controlling trustee consents to act on behalf of the debtor, they need to lodge with the Official Receiver at ITSA in the district the debtor resides in:

  1. the signed authority (Form 13)
  2. the debtor’s Statement of Affairs
  3. the proposal for dealing with the debtor’s affairs

As a result of the filing, the name of the debtor, the date in which the debtor signed the authority, the date the authority was created on the National Personal Insolvency Index (NPII) and the name/contact details of the controlling trustee will be recorded. Any member of the public will, for a fee will be able to conduct a search of the NPII to determine whether a debtor has signed such an authority as a means of dealing with their financial circumstances.

Given the early recording of the authority, creditors have an opportunity of obtaining early information held by the controlling trustee, alternatively obtain the non-confidential parts of the Statement of Affairs from ITSA without a fee when they confirm in writing their status as a creditor. Other members of the public can obtain the non-confidential parts of the Statement of Affairs from ITSA for a fee.

Note ITSA may refuse to provide access to the documentation received where it is determined the safety of any person will be or could be jeopardized.


The first meeting for consideration of a Personal Insolvency Agreement needs to be advertised in a national daily newspaper and a regional daily newspaper in the location in which the debtor resides. This is the responsibility of the Controlling Trustee.

Information that needs to included in the advertisement includes:

  • a meeting is being called pursuant to an authority given under s188 of the Bankruptcy Act;
  • the meeting is being called to consider a Personal Insolvency Agreement proposal under Part X of the Bankruptcy Act,
  • the name of the debtor, their address, occupation and business name;
  • the name of the controlling trustee, their address and contact details; and
  • the time, date and place the meeting is being held;


The Controlling Trustee has an obligation to investigate and report to the creditors on their findings. There are two reports, a s189A Report and a s189B Report.

The Controlling Trustee in their s189A report should:

  • state whether the interests of creditors would be better served by:
    • accepting the personal insolvency agreement proposal proffered by the debtor; or
    • by the bankruptcy of the debtor
  • name each creditor with whom the debtor listed on their statement of affairs as a related entity;
  • declare whether the debtor is a related entity of the controlling trustee or of a related entity to the controlling trustee eg the debtor is an associate or relative of a partner in the controlling trustee’s firm

Report under Section 189B:
The controlling trustee prepares and forwards to creditors a statement in writing which contains information about matters that may reasonably be expected to be dealt with or specified in a resolution at the meeting.

A copy of the reports are forwarded to creditors and the Official Receiver at ITSA. The report is very important as creditors may determine their voting intention on the basis of the controlling trustee’s findings.


The creditor’s meeting must be held no more than 25 working days after the controlling trustee has signed his consent to the s188 authority, or 30 working days if the authority is signed in December.

The controlling trustee must send to each creditor, the debtor and the Official Receiver at least 10 days before the meeting is held:

  • a notice of the meeting including
    • full name and address of the debtor;
    • trade or business name(s) conducted by the debtor if it is a first meeting;
    • time, date and location where the meeting will be held;
    • the agenda of the meeting, including ability to add agenda items with the leave of the meeting; and
    • ability by creditors to make a statement at the meeting at an appropriate time
  • the controlling trustee’s report on the debtor’s affairs and his opinion on the Personal Insolvency Agreement proposal ie viability and any issues arising
  • a statement under s189B detailing the proposed resolutions to be considered
  • a report identifying each creditor the debtor has identified as a related entity (see definition below of a related entity)
  • a declaration by the controlling trustee on whether or not the debtor is a related entity of themselves
  • a declaration by the proposed trustee to administer the Personal Insolvency Agreement (should creditors accept the proposal) on whether they are a related entity of the debtor
  • notice that the creditors MUST declare their relationship with the debtor in their statement of claim and proxy form . This form also requires creditors to disclose any incentive received for the appointment of a proxy
  • a notice outlining the basis and method on how they will be remunerated, and where appropriate an estimate of the expected level of remuneration
  • a notice informing the debtor and each creditor of their right to request the remuneration be taxed within 28 days of receiving notice of the claim for remuneration. A request to have the remuneration taxed should be directed through ITSA.

Where it is the first meeting of creditors, creditors also need to be informed that they can obtain a Part X Information pamphlet entitled Personal Insolvency Agreements, an alternative to bankruptcy from Queensland Administration Services or ITSA . This pamphlet contains information for debtors and also outlines the rights of creditors before a meeting is held, what they can do during the meeting, what they can obtain post meeting and general rights of review, court applications and things of a similar nature.

Creditors will be sent a statement of claim and proxy form and a proof of debt form or a blank statement of debt (per s 64D) to complete.


The controlling trustee must determine whether there is a quorum present at the meeting and view the proxies.

Creditors who are represented at the meeting by proxy need to complete a statement of claim and proxy form disclosing the amount of their debt, whether the debt is secured/unsecured, whether the debt has been purchased, the relationship or association with the debtor and any financial incentives they may have been given to vote in a particular way at the meeting.

The debtor is only excused from attending the meeting of creditors due to illness or other sufficient cause. They need to be available for the creditors to make enquiries of their own before making a decision on whether to accept the personal insolvency agreement proposal or otherwise.

The controlling trustee is the one that determines whether anyone can vote at the meeting and can seek an adjournment of up to 14 days if time is needed to determine whether a person can vote. All parties need to be aware of the consequences of an adjournment ie where the meeting is adjourned, any Creditor’s petition pending in the court is revived and the debtor can be made bankrupt on that petition and if the proposal contains a reference to the antecedent transactions being included, the adjournment may have an impact on the time periods in which the transactions fall into, preventing recovery.

At the meeting, the controlling trustee must table a number of documents. These documents include:

  • the debtor’s Statement of Affairs
  • where there are material difference from the Statement of Affairs originally provided to the controlling trustee, the debtor’s statement identifying what the differences are. This additional information may change the way creditors vote.
  • the controlling trustee’s statement detailing his relationship to the debtor and any additional relationships previously not disclosed.

At the meeting, creditors will be asked to pass a special resolution:-

  • resolving that the debtors property no longer be subject to control;
  • requiring the debtor to execute a Personal Insolvency Agreement, including the provisions to be included in the agreement; or
  • requiring the debtor to present a debtor’s petition within 7 days of the resolution; and
  • where creditors resolve that a Personal Insolvency Agreement be entered into, nominate a trustee and/or trustees to be the trustee or trustees of the agreement.

The creditors may approve the remuneration of the controlling trustee by resolution and revoke the decision to adjourn the meeting.

Where the meeting is adjourned and there is no resolution within four months of the date from which the s188 authority became effective, the controlling trusteeship ends.

Where creditors resolve to accept the debtor’s proposal to enter a Personal Insolvency Agreement ,the controlling trusteeship ends once a Deed has been executed. At this point the trustee takes over the administration.


Debtors and Creditors will need to understand what a relationship is for the purposes of the meeting their requirements of disclosure. A relationship is determined by the definitions of a related entity and a relative.

The definitions of a related entity and a relative are outlined at subsection 5(1) of the Bankruptcy Actas follows.

In relation to a person, a related entity means:
a) a relative or the person;
b) a body corporate of which the person, or a relative of the person, is a director;
c) a body corporate that is related to the body corporate referred to in (b);
d) a director, or a relative of a director, of a body corporate referred to in (b) & (c);
e) a beneficiary under a trust of which the person, or a relative of the person, is a trustee;
f) a relative of such a beneficiary;
g) a relative of the spouse of such a person, or a relative of the person, is a beneficiary;
h) a trustee of a trust under which the person, or a relative of the person is a beneficiary;
i) a member of a partnership of which the person, or a relative of the person, is a member.

In relation to a person, a relative means:
a) the spouse of the person; or
b) a parent or remoter lineal ancestor of the person or of the person’s spouse; or
c) a child or remoter lineal descendant of the person or of the person’s spouse; or
d) a brother or sister of the person or of the person’s spouse; or
e) an uncle, aunt, nephew or niece of the person or of the person’s spouse; or
f) the spouse of a person specified in (b), (c), (d) or (e).

Note: A spouse includes a de facto spouse.

Working day – a working day is a day that is not a Saturday, Sunday or Public holiday in a place where a meeting of creditors is being held

At the Meeting of Creditors, creditors will vote on your proposal as well as procedural and administrative matters. For your proposal to be accepted it requires:-

A simple majority in number of creditors [i.e. 51%] to vote in favour of the proposal. [with voting rights].

– No less than 75% in dollar value of liabilities to vote in favour of the proposal. [with voting rights].

Creditors are not required to attend the meeting personally and may vote either by Proxy or Power of Attorney. The person in debt is required to attend the meeting personally. Should the voting not attain the abovementioned criteria at the meeting, then your proposal is not accepted and you may find yourself in a position where:-

– There is an *impasse on the proposal [* a stalemate]

– Creditors reject your proposal and resolve that you be released from the authority.

If the Part X proposal is not accepted at the meeting of creditors, the Controlling Trustee period may continue for up to 4 months from the date that the Controlling Trustee signed the authority.  The Controlling Trustee period may also be ended in other situations, such as upon the debtor’s bankruptcy, if the debtor dies or if creditors’ resolve for the period to end.  The debtor’s property will remain subject to the Controlling Trustee’s control during this period.


A Part X can generally be varied by means of “leave of the Court” or consent of a meeting of creditors.



A debtor is eligible to sign an authority pursuant to section 188 of the Act if he/she:

  • is personally present or ordinarily resident in Australia ;
  • has a dwelling-house or place of business in Australia ;
  • is carrying on business in Australia , either personally or by means of an agent or manager; or
  • is a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager.

A debtor cannot give an authority within 6 months of giving another authority, unless permission of the Court is obtained.


  1. A Private Trustee who is registered under the Act (Registered Trustee);
  2. A solicitor; or
  3. The Official Trustee (ITSA), a government official.


A Private Trustee who is registered under the Act (Registered Trustee) OR The Official Trustee from (ITSA), Insolvency and Trustees Services of Australia.


The duties and powers of a Trustee may be detailed in the Part X, particularly for a Composition and a Deed of Arrangement.  Such agreements generally incorporate specific provisions of the Act that deal with the Trustee’s duties and powers.

  • perform any functions bestowed upon the Trustee under the Part X agreement, such as realising property, collecting money and paying a dividend to creditors;
  • monitor the terms of the Part X and take appropriate steps if the Part X is not complied with (such as recover property, terminate the Part X or apply to bankrupt the debtor); and
  • issue a certificate to the debtor once the provisions of the Part X have been carried (this is evidence of the finalisation of the Part X).


The National Insolvency Register records details of all Bankruptcies, Part X and Part IX’s. However there are also a number of creditor reporting agencies that may hold public accessible information about your credit worthiness.


Under s222 the Court has the power to declare a deed or a composition void if it is satisfied that the debtor:

  • has given false or misleading information in answer to a question at the meeting of creditors
  • has omitted a material particular from the statement of affairs or included an incorrect and material particular in the statement of affairs

In the case of a deed of arrangement, the application under s222 must be made before the final dividend is paid. With a deed of assignment, the application must be made before the terms of the deed have been carried out. Where a composition has been entered into, the application must be made before the final payment has been made by the trustee to the creditors.

If a deed of arrangement cannot be carried into final effect, the Court may make an order under s236 terminating the deed. Similarly, the Court may terminate a composition under s242.

Under s239 the Court may set aside a composition (and may make a sequestration order) if it considers the terms of the composition are unreasonable or are not calculated to benefit the creditors generally or that for any other reason the composition though.

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