Renewed interest in Part X agreements reinforces the importance of quality proposals

As Personal Insolvency Agreements make a comeback, comprehensive investigations, robust evidence and transparent disclosure are critical to delivering better outcomes for debtors and creditors alike.

During the pandemic, Personal Insolvency Agreements (PIAs) almost vanished from the personal insolvency landscape, as government stimulus and temporary relief measures kept many financially distressed Australians afloat. A few years later, they’re making a comeback.

Unlike bankruptcy, a PIA (also known as a Part X agreement) allows an individual to enter into a legally binding agreement with creditors that can provide a more flexible outcome where there is capacity to deliver a better return than bankruptcy.

The figures reflect this renewed momentum. Although PIAs still make up less than two per cent of all personal insolvencies, their numbers have steadily recovered. In the first 11 months of the 2025–26 financial year (to May), 210 PIAs were recorded, already exceeding last year’s total of 197 and putting them on track for their strongest annual result in several years.

This trend aligns closely with the market pressures my team and I see daily. The latest AFSA statistics show that 43.8 per cent of people who entered a PIA in May 2026 were involved in a business within the previous two to five years. As financial pressures continue to mount – particularly among small business owners dealing with personal guarantees, Director Penalty Notices (DPNs) and rising debt levels – more individuals are looking beyond bankruptcy for a practical way forward.

These are rarely straightforward consumer debt matters. They often involve complex financial structures, competing creditor interests and significant personal assets. In these circumstances, the quality of the proposal – and the investigations supporting it – can make all the difference.

More than avoiding bankruptcy

One of the biggest misconceptions about PIAs is that they’re simply a way of avoiding bankruptcy. They are not. A PIA is designed to achieve the best commercial outcome available. Depending on the circumstances, it may be funded through future income, the sale of assets or third-party contributions, allowing individuals with more complex financial affairs to resolve their debts while providing creditors with a better return than bankruptcy.

Every PIA is unique, but one principle remains constant: creditors need sufficient information to make an informed commercial decision. This places the Controlling Trustee’s investigations at the heart of the process. Thorough enquiries into the debtor’s financial affairs, supported by reliable valuations and transparent disclosure, ensure creditors understand the proposal, the debtor’s financial position, and the likely outcome compared with bankruptcy.

AFSA’s oversight of the personal insolvency system reinforces the importance of proposals being supported by comprehensive information. Well-prepared proposals not only assist creditors in making informed decisions but also promote confidence in the integrity of the process.

Navigating valuations and unregistered advice

Property valuations remain particularly critical in the current market. Equity positions are facing intense scrutiny; valuations that appear overly conservative are highly likely to be questioned or challenged by sophisticated creditors. This makes independent, well-supported valuations essential to securing agreement approval.

We must also remain vigilant regarding unregistered pre-insolvency advisers. AFSA continues to warn consumers about operators who charge substantial upfront fees while promoting unrealistic strategies that do not comply with the Bankruptcy Act. Too often, I see that it is the debtor who ultimately bears the severe professional and personal consequences of non-compliant advice.

A valuable restructuring option

When supported by comprehensive investigations, realistic assumptions, and transparent disclosure, PIAs remain one of Australia’s most effective alternatives to bankruptcy. They can preserve businesses, protect assets where appropriate, provide greater certainty for creditors, and help individuals move forward with a workable solution to financial distress.

For accountants and advisers, the renewed interest in PIAs is an opportunity to look beyond the basic legislative requirements. A robust proposal provides creditors with the clear data they need to vote ‘yes’ while giving clients their best opportunity to achieve a successful outcome.

Emma Mos
Partner
Jirsch Sutherland