Comparison of Options

Eligibility

 BANKRUPTCYDEBT AGREEMENTSPERSONAL INSOLVENCY AGREEMENT
Australian connection Must have a residential or business connection No residential or business connection required Must have residential or business connection
Previous insolvency While previous insolvency does not by itself make a person ineligible, the Official Receiver may not accept a debtor’s petition if the debtor meets certain conditions Must not have been a bankrupt, proposed a personal insolvency agreement or made a debt agreement in the previous 10 years Must not have proposed another personal insolvency agreement in the previous six months
Income threshold No Yes. See AFSA website for indexed amount No
Asset threshold No Yes. See AFSA website for indexed amount No
Debt threshold No Yes. See AFSA website for indexed amount No

Income, employment & trade

 BANKRUPTCYDEBT AGREEMENTSPERSONAL INSOLVENCY AGREEMENT
Payments from income required? Yes, mandatory payments required if income exceeds a statutory threshold. See AFSA website for Indexed amounts Yes, if the terms of the agreement require payments from income – this occurs in most cases Only if the terms of the agreement require payments from income
Ability to continue to operate a business

It depends on the nature of the business and if the trustee sells the business assets. Key points include:

  • when a partner becomes bankrupt it dissolves an existing partnership
  • if trading under a business or assumed name after the date of bankruptcy, a bankrupt must disclose their bankruptcy to people dealing with the business. This includes bankrupts trading alone or jointly
Yes, unless terms of the agreement provide otherwise. If trading under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to all people dealing with the business Yes, if agreement allows for debtor to continue to operate the business
Ability to be a director of, or otherwise manage, a corporation No Yes Not until terms of agreement fully complied with
Other employment restrictions Professional bodies and/or trade associations may have certain conditions of membership for the duration of the bankruptcy. There may be restrictions on holding some statutory positions during the period of bankruptcy/agreement

Assets

 BANKRUPTCYDEBT AGREEMENTSPERSONAL INSOLVENCY AGREEMENT
Ability to retain assets No, unless it is exempt property (for example, household furniture, tools of trade up to a certain value) Yes, unless terms of the agreement provide otherwise Yes, subject to the terms of the agreement
Ability to retain assets acquired during the period of the agreement/ bankruptcy No, unless property being acquired is exempt property Yes Yes, if agreement allows for debtor to continue to operate the business
Ability to be a director of, or otherwise manage, a corporation No Yes Yes
Can assets previously sold or transferred for less than market value be recovered? Yes, subject to certain statutory conditions being met No Not unless the agreement specifies that the antecedent transaction provisions of the Bankruptcy Act apply to the debtor
Can payments made to creditors prior to the agreement/ bankruptcy be recovered? Yes, subject to certain statutory conditions being met No Not unless the agreement specifies that the antecedent transaction provisions of the Bankruptcy Act apply to the debtor

Debts

 BANKRUPTCYDEBT AGREEMENTSPERSONAL INSOLVENCY AGREEMENT
Unsecured debts Unsecured creditors receive pro rata payment from funds recovered by the trustee after fees and costs have been deducted. There are some statutory priority payments to particular classes of creditors like employees All unsecured creditors receive pro rata payments Unsecured creditors can receive differential payment rates if the terms of the agreement provide for this. There are some statutory priority payments to particular classes of creditors like employees
Secured debts Rights of secured creditors are not affected. They can repossess secured assets if there is default in payment Rights of secured creditors are not affected. They can repossess secured assets if there is default in payment Rights of secured creditors are not affected. They can repossess secured assets if there is default in payment
Release from debt Upon discharge from bankruptcy, but not released from some types of debts Upon completing terms of agreement, but not released from some types of debts As per terms of the agreement, but not released from some types of debt
Fees for administration of the estate/s Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General Subject to creditor approval Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General

Restrictions

 BANKRUPTCYDEBT AGREEMENTSPERSONAL INSOLVENCY AGREEMENT
Ability to travel overseas Prior consent of trustee required. A fee is payable where the trustee is the Official Trustee No statutory restriction No statutory restriction
Ability to travel within Australia No statutory restriction No statutory restriction No statutory restriction
Incurring further debt Must disclose insolvency if incurring debt or obtaining goods and services on credit in excess of a threshold. See AFSA website for Indexed amounts Must disclose the debt agreement if incurring debt or obtaining goods and services on credit in excess of a threshold. See AFSA website for Indexed amounts No statutory restriction

Fees and Charges

 BANKRUPTCYDEBT AGREEMENTSPERSONAL INSOLVENCY AGREEMENT
Statutory filing fee No Yes (see AFSA website) Yes (see AFSA website)
Statutory levies A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government (see AFSA website) A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government (see AFSA website) A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government (see AFSA website)
Fees for administration of the estate/s Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General Subject to creditor approval Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General

As per AFSA Website: https://www.afsa.gov.au/debtors/comparison-of-options-1