Don't Panic: A Practical Action Plan for Managing Personal Insolvency

Here’s the truth: Most people in financial crisis wait too long, act too late, and end up losing more than they need to. Without expert help, creditors recover just 2.42 cents per dollar owed. With a professionally managed Personal Insolvency Agreement (PIA), that figure jumps to 10.36 cents—over 4x better outcomes for all parties involved.

This isn’t just theory—it’s a roadmap. 

Our proven 5-step action plan will help you:

• Understand your financial position

• Avoid irreversible mistakes

• Explore all available solutions

• Regain control quickly

• Protect what matters most

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What Is Personal Insolvency?

Here's what happens when insolvency goes wrong: The average person recovers less than 3 cents per dollar owed to creditors, and 50% lose assets they could have legally protected.  

This framework prevents both outcomes.

Key signs you may be insolvent:

• You’re using credit to pay for essentials like groceries or bills

• You’ve received letters of demand or legal threats

• You’re behind on loan, tax, or superannuation payments

• Your income doesn't cover your minimum monthly repayments

  
  

Step 1: Face the Facts – Get Clear on Where You Stand

Financial overwhelm thrives in uncertainty. Start by collecting the essentials:

·       Your debts: Credit cards, ATO, rent, loans

·       Your income: Regular + irregular

·       Your assets: Home equity, vehicles, super

·       Your legal risks: Especially if you’re a director (you may be liable under a DPN)

📌 Pro Tip: Even if the ATO or creditors are circling, the earlier you act, the more options you have.

Step 2: Understand All the Legal Paths Available

Here’s a breakdown of the most common personal insolvency options in Australia:

1. Informal Payment Plans

✅ Quick and flexible

⚠️ Not legally binding

2. Debt Agreements (Part IX)

✅ Legally binding and regulated by AFSA

⚠️ Income and debt limits apply

3. Personal Insolvency Agreement (PIA)

✅ Custom plan for high-debt individuals

✅ Keeps you out of bankruptcy

✅ May protect assets

4. Bankruptcy

✅ Full legal protection

⚠️ Potential long-term consequences

Step 3: Build Your Insolvency Action Plan

Your 5-part strategy to regain control:

1. Prioritise Essentials: Rent, utilities, food, and insurance come first.

2. Talk to Creditors Early: Many are open to informal payment terms if you act before legal proceedings start.

3. Check for Government Relief: The ATO is chasing $35B in small business debt. Ask about payment plans or hardship relief.

4. Consider a PIA: This formal alternative to bankruptcy can help you settle debts without losing your assets.

5. Get Expert Help

As TTJ's Thyge Trafford-Jones puts it:

“Most people I help are good people in tough situations. There is always a legal way forward—if you get help early.”

Real Talk: Why Most People Wait Too Long

Step 4: Act Before It’s Too Late

Here’s why waiting is dangerous:

❌ Legal action can escalate

❌ Assets may be forcibly sold

❌ Director Penalty Notices (DPNs) can make you personally liable

According to ASIC, over 7,400 companies entered external administration last year—a 47% increase. Most could’ve saved more with earlier intervention.

Step 5: Know When to Call in a Professional

You need expert support if:

·       You’ve received a DPN from the ATO

·       You’re considering bankruptcy

·       You want to protect your home or car

·       You’re unsure what to say to creditors

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What we do for you:

·       Negotiate with creditors on your behalf

·       Create legally compliant repayment plans

·       Protect your assets and your future

·       Offer fast, judgement-free, confidential help

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FAQs: Personal Insolvency in Plain English

What’s the difference between a PIA and bankruptcy?

A PIA is a negotiated repayment plan that avoids bankruptcy and may protect your assets. Bankruptcy is a legal status with stricter consequences.

Will my employer find out?

In most cases, no. Bankruptcy is a public record, but a PIA is private unless you tell them.

Can I keep my house?

Possibly. If there’s equity and it’s protected under a restructure plan, you may be able to retain it. 

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Key Takeaway

Without a plan, you risk everything. With a plan, you protect your future.

Take Control Today – We’re Here to Help

Whether you're in construction, retail, hospitality—or just in over your head—you don’t have to go it alone.

Free initial consultation

Personalised action plan

Confidential. Judgment-free. Legally sound.

Book a free consultation now

ARTICLE SOURCES: 1: https://www.afsa.gov.au/about-us/statistics-and-insights/administration-statistics/annual-administration-statistics

2: https://www.afsa.gov.au/about-us/statistics-and-insights/system-insights/state-personal-insolvency-system

3: https://justiceconnect.org.au/resources/joint-debts-and-assets-in-bankruptcy/ 

4: https://www.afsa.gov.au/about-us/statistics-and-insights/system-insights/feature-analyses/people-personal-insolvencies-less-50000-liabilities