What is a Part X Agreement and how does it work?
A Part X Agreement is a type of insolvency agreement that gets you out of debt with your creditors. It is part of the Bankruptcy Act and provides you with a process that allows you to make a proposal to your creditors that they vote upon in a formal meeting. Basically, it is an alternative to bankruptcy, but it still lists on you on the National Personal Insolvency Index forever. There is no way for that data to be removed. You will also find that your Part X Agreement will be listed on your credit report for 7 years.
As for how a Part X Agreement works, you have to appoint a Controlling Trustee. Your Controlling Trustee is going to start the process for your Part X Agreement. This is going to involve your Personal Insolvency Agreement proposal to your creditors.
Once your proposal is drawn up, a meeting will be called by your trustee that involves all of your creditors. You will need to attend this meeting. You will find that the meeting will be advertised in national and regional daily newspapers. It is then that your trustee will form a recommendation that states to your creditors that they are getting a better return than if you filed bankruptcy. This is because the Part X Agreement allows for you to repay your debts in some form, as opposed to a bankruptcy that discharges the debt. This is the report that will be provided to the creditors when the meeting is called.
If the creditors, or 75% of them, accept the Part X Agreement, it is then the responsibility of the trustee to make dividend payments to the creditors as you make contributions toward your agreement.
After entering into a Part X Agreement, you will find that new credit is hard to acquire. If you are able to acquire it, you can count on paying a higher rate of interest for the next 7 years. Fortunately, you do not have to worry about selling your home or property to satisfy your agreement. Furthermore, you will have to pay fees to your trustee, but that is usually included within your contribution amount. Your trustee simply takes out their part before making payments to your creditors.Â
If you’re not sure if you qualify for a Part X Agreement, your income cannot exceed $61,875 after taxes, $82,501 in assets, and $82,501 in debt. The debt that you wish to pay off must be unsecured debt. This means that it is not being secured by any sort of collateral such as a home or a car. This is because you can use the collateral to satisfy any secured debt that you cannot pay.
It is usually wise to see what other options you can take advantage of before entering into a Part X Agreement. This is because of the credit ramifications that exist. You have options such as mortgage refinance, debt consolidation loans, and informal arrangements. If none of that works for you, make a Part X Agreement your next step before considering bankruptcy.
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