Part X Agreements: A Strategic Alternative to Bankruptcy

When a client is personally exposed after a company collapse, there’s often an assumption that bankruptcy is the only way out. But for clients with active directorships, group structures or reputational concerns, that path may be unnecessarily destructive.

In the right circumstances, a well-structured Personal Insolvency Agreement (PIA) under Part X of the Bankruptcy Act can offer a smarter, more strategic alternative, especially when combined with expert guidance.

At de Jonge Read®, we’ve helped many clients achieve outcomes that resolve substantial debt while protecting what matters most: their future.

Dan (name changed for confidentiality) was the director of a company that had entered liquidation. The fallout left him personally liable for over $4 million in provable debt, including a large ATO claim (due to a Director Penalty Notice (DPN)). He also carried additional liabilities via intercompany guarantees across a family group structure and faced the real risk of disqualification as a director in his remaining businesses.

For Dan, a straightforward bankruptcy would have meant more than just financial consequences. It would have impacted his ongoing ventures, reputation and ability to continue trading.

Dan engaged de Jonge Read® early. That timing opened the door to a solution tailored to his circumstances and designed to limit long-term damage.

Working closely with his accountant, lawyer and a Controlling Trustee, de Jonge Read® helped structure a Personal Insolvency Agreement that offered creditors a lump sum via a creditors’ trust. We ensured all documentation, including related-party creditor claims, was properly prepared and disclosed. Throughout the process, we managed communication with the ATO, Controlling Trustee, liquidator and AFSA to maintain transparency and trust. The trust and the PIA were timed to execute at the same moment, which minimised the period of director disqualification.

de Jonge Read® guided the process from start to finish, helping Dan understand his options, prepare documentation and maintain creditor confidence throughout.

Dan’s $4 million-plus in debt was resolved for just over $120,000. The proposal was unanimously accepted by creditors, including the ATO. Because the PIA and trust executed together, his disqualification as a director lasted only seconds. Dan retained his directorships and continued his involvement in other businesses without interruption.

This outcome shows what is possible when insolvency solutions are structured strategically and implemented early, particularly for clients with complex financial positions. With the right support, clients do not have to accept the harshest outcomes as inevitable.

• Early action makes all the difference. Dan’s result was only possible because he acted before pressure escalated. Timing opens options.
• Structure is critical. The success of this strategy relied on careful coordination between the PIA and the creditors’ trust to protect directorships.
• Creditor communication is key. Clear, transparent engagement with major creditors, including the ATO, was central to securing unanimous support.
• Related-party claims must be handled properly. In group structures, creditor votes often depend on related-party loans. These must be documented, defensible and fully disclosed.
• Current risks must be factored in. Phoenixing legislation (read more here), the expansion of Director Penalty Notices (read more here) and increased scrutiny of related-party arrangements mean the environment is less forgiving than it once was.

At de Jonge Read®, we stay across every legislative and regulatory development, from AFSA guidance to tax office enforcement trends, so we can help you support your clients with confidence.

We bring together insolvency insight, legal coordination and practical experience to ensure the strategy works not just in theory, but in execution.

If you are supporting a client who is personally exposed following a company failure, wants to remain active as a director and may have access to a lump sum to put forward to creditors, it is worth exploring whether a Personal Insolvency Agreement under Part X could offer a better way forward.

In many cases, there are options beyond bankruptcy, even when the situation feels unworkable. Early advice is key. The right structure, managed well, can preserve directorships, protect reputation and deliver a fair outcome for all parties.

At de Jonge Read®, we work alongside accountants, lawyers and financial advisors to develop tailored, practical strategies that resolve debt while protecting the client’s future.