Credit Counsellors Australasia» Introduction of the registration of Debt Agreement Administrators http://debtcca.com Escape Debt now! Debt Agreements, Debt Consolidators & Credit Relief Specialists Tue, 07 Sep 2010 01:13:17 +0000 http://wordpress.org/?v=2.9.1 en hourly 1 Introduction of the registration of Debt Agreement Administrators http://debtcca.com/introduction-of-the-registration-of-debt-agreement-administrators.html http://debtcca.com/introduction-of-the-registration-of-debt-agreement-administrators.html#comments Tue, 05 Jan 2010 00:24:51 +0000 admin http://debtcca.com/?p=9 Debt agreements pursuant to the Part IX regime of the Bankruptcy Act 1966 were introduced in 1996. Before its introduction there was no mechanism in place to offer relief from indebtedness to those insolvents who sought to remedy their situation without resorting to filing a debtor’s petition or being subjected to a creditor’s petition. Personal Insolvency Agreements (Part X) have been available for many years but have proven to be cumbersome to implement and less than cost effective for smaller debtors.

Bankruptcies in Australia have been ever increasing and in an endeavour to stem the numbers the Australian Federal Government legislated and introduced a further and innovative Part to the Bankruptcy Act 1966 titled Part IX-Debt Agreements in 1996.

The intent of Part IX was to introduce a low cost alternative to debtors to settle indebtedness by way of a legally binding agreement between debtors and creditors and touted as a flexible alternative to bankruptcy on the web site of the Insolvency Trustee Service Australia (ITSA). At the time of its inception and contrasting with Part X, Part IX did not specify that the administration of a debt agreement must be undertaken by a registered trustee or the Official Receiver and whilst not discounting these fiduciaries the legislation specifically authorised another person to undertake the administration; but without expressing any particular requirement or qualification. In fact S185C(2)(c) was interpreted to include an administrator who could be the debtor, a family member of a debtor, a creditor or any other person not excluding a commercial enterprise. Entrepreneurs seized upon what appeared to be an opportunity to service a new niche industry and within a short time businesses were established, both as sole trader, partnership and corporate ventures, offering assistance to those in financial distress gain relief from indebtedness utilising the new legislation.

Lacking any regulatory direction or control and in the absence of any set criteria in the statute as to who may engage in administering debt agreement services a new commercially based insolvency industry emerged. But, from the outset the system appeared doomed by the ongoing complaints of community based agencies, creditors at large and participating debtors concerned by the manner in which the new mechanism was managed, the fees and charges applied by operators, entry into the new industry by undesirables and allegations of manipulation of statutory information. In an attempt to remedy the situation that arose and in an attempt to give validity to the system, Part IX has been amended on a number of occasions with a view to tightening the regulatory grip on the commercial element. Ultimately, The Bankruptcy Legislation Amendment (Debt Agreements) Act 2007 was enacted requiring a debt agreement administrator to be registered and subject to a more rigid regime.

The purpose of this paper is to analyse and evaluate the registration of debt agreement administrators. In order to do so this essay considers the issue retrospectively leading to its existing form and offers discussion concerning observations of an industry that has grown rapidly and unexpectedly.

]]> http://debtcca.com/introduction-of-the-registration-of-debt-agreement-administrators.html/feed 0 Part IX Debt Agreements – simple or complex? http://debtcca.com/part-ix-debt-agreements-%e2%80%93-simple-or-complex.html http://debtcca.com/part-ix-debt-agreements-%e2%80%93-simple-or-complex.html#comments Sat, 21 Nov 2009 11:23:26 +0000 admin http://debtcca.com/?p=39 Initially some consideration must be given to how and why a new industry was able to blossom merely by the introduction of a rather innocuous piece of legislation. The intent of the legislators was apparent in so much as the purpose was to introduce what was to be a cheap and easy mechanism for debtors to resolve debt issues with their affected creditors and anticipated the administrator to be the debtor themselves, a relative or friend. Idealistically, the presumption that documentation would be able to be done or understood quickly, or with very little effort is relevant. However, as so often occurs, legislators lacked the insight to consider the willingness of the public at large to engage in what they perceive to be a sophisticated process accompanied by difficult and overwhelming documentation requiring the assistance of an ‘expert’. One could liken the concept of this industry to that of a taxation agent who promulgates a service and relies upon the inability or unwillingness of clients to undertake the paperwork for fear that the end result may be incorrect. Furthermore, the system failed to introduce statutory documentation in support of the mechanism and its presentation and delivery was ad hoc at best relying solely on the inclusion of the elements required of a proposal insofar as it should express and identify the debtor’s property to be dealt with under the agreement; specify how such property was to be dealt with; and authorise a person to deal with the identified property. It is no surprise that a layman would shy away from such an undertaking.

Given this situation the Part IX regime process, at the outset, was sufficiently complex to invite some form of  rudimentary assistance being offered to a debtor but those most likely to be available to give professional advice, lawyers and accountants, appeared disinterested. Registered trustees likewise showed no interest considering the process less of a commercial opportunity than Part X debt agreements and bankrupt estates with assets. Unsurprisingly again, the gap in an emerging market was filled by others less qualified particularly so when their involvement was not proscribed.

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