185KPrevention of proceedings relating to debts

185K  Prevention of proceedings relating to debts  (1) While a debt agreement is in force and details of it are entered on the National Personal Insolvency Index, a creditor cannot:  (a) present a creditor’s petition against the debtor; or  (b) proceed further with a creditor’s petition that was presented against the debtor before details of the debt agreement were entered in the Index; or  (c) enforce a remedy against the debtor’s person or property, or start or take a fresh step in legal proceedings, in respect of a provable debt.  (2) Paragraph (1)(c) does not prevent a creditor from enforcing a remedy against the debtor or the debtor’s property for a liability under one or more of the following:  (a) a maintenance agreement;  (b) a maintenance order;  (c) a proceeds of crime law.  (3) While a debt agreement is in force and details of it are entered on the National Personal Insolvency Index:  (a) a sheriff must not take action, or further action, to execute, or sell property under, any process issued by a court to enforce payment of a provable debt owed by the debtor; and  (b) a person who is entitled under a law of the Commonwealth, or of a State or Territory, to retain or deduct money from money that is or will be owing or payable to the debtor must not retain or deduct money. Division 3A—Duties of administrators 185LA  Duties of an administrator—general  (1) The duties of an administrator of a debt agreement include:  (a) dealing with the debtor’s property in the manner specified in the debt agreement; and  (b) giving information about the administration of the debt agreement to the debtor if the debtor makes a reasonable request for the information; and  (c) giving information about the administration of the debt agreement to a creditor who:  (i) is a party to the debt agreement; and  (ii) makes a reasonable request for the information; and  (d) considering whether the debtor has committed an offence against this Act; and  (e) referring to the Inspector‑General or to relevant law enforcement authorities any evidence of an offence by the debtor against this Act.  (2) An administrator of a debt agreement has a duty not to be reimbursed for expenses the administrator incurred in administering the debt agreement unless those expenses are of a kind specified in the relevant debt agreement proposal as mentioned in subsection 185C(3B).  (3) If an administrator of a debt agreement signs a certificate under paragraph 185M(1DB)(a) or subsection 185M(1F) in relation to a proposal to vary the agreement, the administrator has a duty to ensure that the certificate is correct. 185LB  Administrator to notify creditors of a 3‑month arrears default by a debtor  (1) If a 3‑month arrears default by a debtor occurs at a particular time in relation to a debt agreement, the administrator of the debt agreement must notify, in writing, each creditor who is a party to the debt agreement of that occurrence within 10 business days of that occurrence.  (2) The administrator of a debt agreement is not required to give a notification under subsection (1) in respect of a 3‑month arrears default (the first default) if:  (a) one or more other 3‑month arrears defaults by the debtor have occurred in relation to the debt agreement; and  (b) the 3‑month period to which the first default relates overlaps with the 3‑month period to which any of those other 3‑month arrears defaults relate; and  (c) a notification under subsection (1) has already been given in respect of any of those other 3‑month arrears defaults.  (3) For the purposes of this section, a 3‑month arrears default by a debtor occurs at a particular time (the test time) in relation to a debt agreement if:  (a) at the beginning of the 3‑month period ending immediately before the test time, one or more payments (the due payments) in respect of provable debts became due and payable by the debtor under the debt agreement; and  (b) throughout that 3‑month period, the debtor was in arrears in respect of any or all of the due payments; and  (c) either:  (i) the total amount that the debtor was so in arrears exceeds $300, or 20% of the total of all of the due payments at the beginning of that 3‑month period, whichever is higher; or  (ii) if the total of all of the due payments at the beginning of that 3‑month period was $300 or less—no payment was made in that period to reduce any of the due payments. 185LC  Administrator to notify Official Receiver of a designated 6‑month arrears default by a debtor  (1) If a designated 6‑month arrears default by a debtor occurs at particular time in relation to a debt agreement, the administrator of the debt agreement must notify, in writing, the Official Receiver of that occurrence within 10 business days of that occurrence.  (2) The administrator of a debt agreement is not required to give a notification under subsection (1) in relation to the debt agreement if the administrator has already given such a notification in relation to the debt agreement.  (3) For the purposes of this Part, a designated 6‑month arrears default by a debtor occurs at a particular time (the test time) in relation to a debt agreement if:  (a) both of the following apply:  (i) before the test time, one or more payments in respect of provable debts became due and payable by the debtor under the debt agreement;  (ii) at no time during the 6‑month period ending immediately before the test time were any obligations in respect of those payments discharged; or  (b) both of the following apply:  (i) at the test time, the obligations created by the debt agreement have not been discharged;  (ii) the last of those obligations should have been discharged at a time 6 months before the test time. 185LD  Administrator to maintain separate bank account  (1) A person who is:  (a) either:  (i) a registered debt agreement administrator; or  (ii) a registered trustee; and  (b) the administrator of one or more debt agreements; must pay all money received by the person from debtors under those debt agreements to the credit of a single interest‑bearing bank account that:  (c) bears:  (i) the person’s own name; and  (ii) the words “—Debt Agreement Administration Trust Account”; and  (d) complies with such other requirements (if any) as are specified in the regulations.  (2) The person must only pay into the account money received by the person from debtors under debt agreements.  (2A) The person must not pay any money out of the account otherwise than:  (a) for purposes related to the administration of debt agreements; or  (b) in accordance with this Act; or  (c) in accordance with a direction of the Court.  (3) The person is entitled, in his or her personal capacity, to each payment of interest on the account, less an amount equal to the bank fees or charges (if any) paid or payable on the account during the period to which the interest relates.  (4) Interest on money in the account is not subject to taxation under a law of the Commonwealth, a State or a Territory except as provided in Part 2 of the Bankruptcy (Estate Charges) Act 1997. 185LDA  Offence relating to the trust account   A person commits an offence of strict liability if:  (a) the person is subject to a requirement under subsection 185LD(1), (2) or (2A); and 185LE  Administrator to keep accounts etc.  (1) An administrator of a debt agreement must:  (a) keep such accounts, books and records as are necessary to give a full and correct account of the administration of the debt agreement; and  (b) if required to do so by the Inspector‑General—make those accounts and records available for inspection by the Inspector‑General; and  (c) if required to do so by the Inspector‑General—answer any inquiries about the debt agreement; and  (d) cooperate with any inquiry or investigation made by the Inspector‑General under paragraph 12(1)(bb).  (1A) A person commits an offence of strict liability if:  (a) the person is subject to a requirement under paragraph (1)(a) or (b); and  (2) If an administrator of one or more debt agreements is to be remunerated under those debt agreements, the administrator must:  (a) maintain a separate record of:  (i) money received by the administrator from the debtors in relation to those debt agreements; and  (ii) payments made by the administrator in relation to those debt agreements; and  (iii) the balance of money held by the administrator in relation to those debt agreements; and  (b) if the administrator maintains an account under subsection 185LD(1)—at least once every 45 days, reconcile the balance held in the subsection 185LD(1) account with the corresponding record maintained under paragraph (a). 185LEA  Annual return  (1) If, during a financial year, an administrator of a debt agreement administered the agreement, the administrator must, within the period of 25 business days after the end of that year, give the Inspector‑General a return, in the approved form, in relation to the administration of that agreement during that year.  (2) Subsection (1) is an offence of strict liability. 185LF  Succession of administrator  (a) a person (the earlier administrator) ceases to be the administrator of a debt agreement; and  (b) another person (the later administrator) becomes the administrator of the debt agreement in place of the earlier administrator. Duty  (2) The earlier administrator must:  (a) prepare an account of:  (i) money received by the earlier administrator from the debtor in relation to the debt agreement; and  (ii) payments made by the earlier administrator in relation to the debt agreement; and  (b) keep a copy of the account; and  (c) give the later administrator:  (i) a copy of the account; and  (ii) a copy of any other accounts the earlier administrator received from a person who was the administrator of the debt agreement before the earlier administrator. 185LG  Duties of an administrator in relation to debt agreements—extended meaning  (1) For the purposes of this Act, a duty of an administrator under this Act is taken to be a duty of an administrator in relation to a debt agreement, even if the duty does not relate to a particular debt agreement.  (1A) Before a person signs a certificate under paragraph 185C(4C)(b) in relation to a debt agreement proposal, the person must:  (a) make reasonable inquiries about the debtor’s financial situation; and  (b) take reasonable steps to verify the debtor’s financial situation. For the purposes of this Act, the requirements set out in paragraphs (a) and (b) are taken to be duties of an administrator in relation to a debt agreement.  (2) If a person signs a certificate under subsection 185C(2D) or paragraph 185C(4C)(b) in relation to a debt agreement proposal:  (a) the person must ensure that the certificate is correct; and  (b) for the purposes of this Act, the requirement set out in paragraph (a) is taken to be a duty of an administrator in relation to a debt agreement.  (3) For the purposes of this Act, a requirement set out in subsection 185LF(2) or 185N(5) is taken to be a duty of an administrator in relation to a debt agreement. Division 4—Varying a debt agreement 185M  Varying a debt agreement Proposing to vary a debt agreement  (1) A debtor or creditor who is a party to a debt agreement may give the Official Receiver a written proposal to vary the agreement.  (1A) The proposal must be in the approved form.  (1B) The proposal must be accompanied by an explanatory statement in the approved form containing such information as the form requires.  (1C) The subsection (1B) statement may be set out in the same document as the proposal.  (1D) The proposal must not seek to vary the agreement so that the agreement would provide for the debtor to make payments under the agreement, in respect of provable debts in relation to the agreement, after:  (a) 3 years beginning on the day the agreement was made; or  (b) if subsection (1DA) or (1DB) applies—5 years beginning on the day the agreement was made. Note: Section 185H deals with when a debt agreement is made.  (1DA) This subsection applies if subsection 185C(2AB) applied to the debtor at the time the relevant debt agreement proposal was given to the Official Receiver.  (1DB) This subsection applies if:  (a) the proposal given to the Official Receiver is accompanied by a certificate signed by the administrator of the agreement stating that the administrator has reasonable grounds to believe:  (i) that the debtor has suffered a substantial change in circumstances after the agreement was made that was not foreseen at the time the agreement was made; and  (ii) that the debtor is not likely to be able to discharge the obligations created by the agreement as and when they fall due because of that change; and  (b) the proposal does not increase the total of the payments that the debtor would be required to make under the agreement.  (1E) If:  (a) subsection 185C(2AB) did not apply to the debtor at the time (the proposal time) the relevant debt agreement proposal was given to the Official Receiver; and  (b) a person did not give a certificate under paragraph 185C(4C)(b) in relation to the relevant debt agreement proposal; the proposal under subsection (1) of this section must not seek to vary the agreement so that the amount worked out using the following formula (expressed as a percentage) exceeds the percentage in effect under an instrument under subsection 185C(4B) at the proposal time:   (1F) The proposal given to the Official Receiver must be accompanied by a certificate signed by the administrator of the agreement stating that, having regard to:  (a) the circumstances in existence at the time the administrator signs the certificate; and  (b) any other relevant matters; the administrator has reasonable grounds to believe that the debtor is likely to be able to discharge the obligations created by the agreement (as proposed to be varied) as and when they fall due. Processing a proposal to vary a debt agreement  (2) The Official Receiver must process the proposal in accordance with section 185MA if the Official Receiver is satisfied that subsections (1A), (1B), (1D), (1E) and (1F) of this section have been complied with.  (2A) However, the Official Receiver is not required by subsection (2) to process the proposal if:  (a) the Official Receiver reasonably believes that complying with the agreement (as proposed to be varied) would cause undue hardship to the debtor; or  (b) the Official Receiver thinks that the creditors’ interests would be better served by not processing the proposal.  (2B) If the Official Receiver decides not to process the proposal because of subsection (2A), the Official Receiver must give written notice of the decision, and the reasons for it, to:  (2C) If the Official Receiver decides not to process the proposal because of subsection (2A), the debtor or an affected creditor may apply to the Administrative Review Tribunal for review of the decision. Varying the agreement  (3) If the proposal is accepted, the agreement is varied in the way set out in the proposal. Note: Section 185MC explains how a proposal is accepted. 185MA  Procedures for dealing with proposals to vary debt agreements  (1) If the Official Receiver is required by subsection 185M(2) to process a proposal to vary a debt agreement, the Official Receiver must write to each of the affected creditors who is known to the Official Receiver, asking each affected creditor to indicate whether the proposal should be accepted.  (2) When writing to each affected creditor under subsection (1) about a proposal to vary a debt agreement, the Official Receiver must:  (i) the proposal; and  (ii) the relevant subsection 185M(1B) statement; and  (b) ask the creditor to give a written statement setting out whether or not the proposal should be accepted; and  (c) inform the creditor of the person to whom the statement should be given and of the need to give the statement before the applicable deadline. 185MB  Inspection of creditor’s statement   If an affected creditor gives a paragraph 185MA(2)(b) statement: 185MC  Acceptance of a proposal to vary a debt agreement  (1) A proposal to vary a debt agreement is accepted if:  (a) the Official Receiver writes to affected creditors of a debtor under section 185MA; and  (b) a majority in value of the creditors who reply before the applicable deadline state that the proposal should be accepted.  (2) A proposal that is accepted under subsection (1) is taken to be accepted at the applicable deadline.  (3) In assessing, for the purposes of paragraph (1)(b), the value of a creditor who is a related entity of the debtor, any debt that was assigned to the creditor is taken to have a value equal to the value of the consideration that the creditor gave for the assignment.  (4) For the purposes of paragraph (1)(b), the value of a creditor is to be assessed as at the time when the acceptance of the relevant debt agreement proposal for processing was recorded on the National Personal Insolvency Index.  (5) For the purposes of paragraph (1)(b), a secured creditor is taken to be a creditor only to the extent (if any) by which the amount of the debt owing to the creditor exceeds the value of the creditor’s security.  (a) the person is the administrator of a debt agreement; and  (c) the person does so with the intention of securing the affected creditor’s acceptance or non‑acceptance of the proposal to vary the agreement. 185MD  Withdrawal of proposal to vary a debt agreement  (a) a proposal to vary a debt agreement is given under section 185M; and  (b) the applicable deadline has not arrived; and  (c) the proposal has not been accepted. Withdrawal of proposal  (a) the Official Receiver becomes aware that the relevant subsection 185M(1B) statement was deficient because it omitted a material particular or because it was incorrect in a material particular; or  (b) the Official Receiver becomes aware of a material change in circumstances that:  (i) was not foreshadowed in the relevant subsection 185M(1B) statement; and  (ii) in the opinion of the Official Receiver, is capable of affecting an affected creditor’s decision whether or not to accept the proposal; the Official Receiver may declare in writing that the proposal is withdrawn. Notification of withdrawal  (3) If the Official Receiver makes a declaration under subsection (2), the Official Receiver must give written notice of the declaration, and the reasons for it, to:  (4) If the Official Receiver decides to make a declaration under subsection (2), the debtor or an affected creditor may apply to the Administrative Review Tribunal for review of the decision. Division 5—Ending a debt agreement 185N  End of debt agreement on discharge of obligations under agreement Time of end of debt agreement  (1) A debt agreement ends when all the obligations that it created have been discharged, unless the agreement has been terminated earlier under section 185P, 185Q, 185QA or 185R. Keeping surplus property that was subject to an agreement  (2) When a debt agreement ends under subsection (1), the debtor is entitled to any property that was subject to the debt agreement but that was not required by the agreement to be distributed to creditors. Example: Rhea entered into a debt agreement that required her to sell her boat and car and to pay her creditors $15,000 from the proceeds. The debt agreement ended when she sold her boat and car for $16,000 and paid her creditors $15,000. She may keep the remaining $1,000 received from the sale. Certificate of the end of a debt agreement  (3) If a debt agreement ends under subsection (1), the Official Receiver must give the debtor a certificate to that effect. Evidentiary value of certificate  (4) The certificate is prima facie evidence of the facts stated in it. Notification of end of debt agreement  (5) If a debt agreement ends under subsection (1), the person who was the administrator of the agreement immediately before it ended must, within 5 business days after the end of the agreement, notify the Official Receiver, in writing, of the end of the agreement.  (6) A notification under subsection (5) must be in the approved form. 185NA  Release of debtor from debts Time and effect of release  (1) When a debt agreement ends under subsection 185N(1), the debtor is released from provable debts from which the debtor would have been released if the debtor had been discharged from bankruptcy immediately after the acceptance of the relevant debt agreement proposal for processing was recorded on the National Personal Insolvency Index. Limits on release  (2) The release ceases to operate if the debt agreement is declared void by the Court.  (3) The release does not:  (a) release anyone else from a debt that he or she owes jointly with the debtor; or  (b) release a guarantor from the guarantee that the guarantor gave for the debtor’s debt. 185P  Terminating a debt agreement by accepting a proposal Proposing to terminate a debt agreement  (1) The debtor (or the debtor’s personal representative if the debtor has died) or a creditor who is bound by a debt agreement may give the Official Receiver a written proposal to terminate the agreement.  (1A) The proposal must be in the approved form.  (1B) A proposal must be accompanied by an explanatory statement in the approved form containing such information as the form requires.  (1C) The subsection (1B) statement may be set out in the same document as the proposal. Processing a proposal to terminate debt agreement  (2) The Official Receiver must process the proposal in accordance with section 185PA if the Official Receiver is satisfied that subsections (1A) and (1B) of this section have been complied with. Termination of the debt agreement when the proposal is accepted  (3) The debt agreement is terminated when the proposal is accepted. Note: Section 185PC explains how a proposal is accepted. 185PA  Procedures for dealing with proposals to terminate debt agreements  (1) If the Official Receiver is required by subsection 185P(2) to process a proposal to terminate a debt agreement, the Official Receiver must write to each of the affected creditors who is known to the Official Receiver, asking each affected creditor to indicate whether the proposal should be accepted.  (2) When writing to each affected creditor under subsection (1) about a proposal to terminate a debt agreement, the Official Receiver must:  (i) the proposal; and  (ii) the relevant subsection 185P(1B) statement; and  (b) ask the creditor to give a written statement setting out whether or not the proposal should be accepted; and  (c) inform the creditor of the person to whom the statement should be given and of the need to give the statement before the applicable deadline. 185PB  Inspection of creditor’s statement   If an affected creditor gives a paragraph 185PA(2)(b) statement: 185PC  Acceptance of a proposal to terminate a debt agreement  (1) A proposal to terminate a debt agreement is accepted if:  (a) the Official Receiver writes to affected creditors of a debtor under section 185PA; and  (b) a majority in value of the creditors who reply before the applicable deadline state that the proposal should be accepted.  (2) A proposal that is accepted under subsection (1) is taken to be accepted at the applicable deadline.  (3) In assessing, for the purposes of paragraph (1)(b), the value of a creditor who is a related entity of the debtor, any debt that was assigned to the creditor is taken to have a value equal to the value of the consideration that the creditor gave for the assignment.  (4) For the purposes of paragraph (1)(b), the value of a creditor is to be assessed as at the time when the acceptance of the relevant debt agreement proposal for processing was recorded on the National Personal Insolvency Index.  (5) For the purposes of paragraph (1)(b), a secured creditor is taken to be a creditor only to the extent (if any) by which the amount of the debt owing to the creditor exceeds the value of the creditor’s security.  (a) the person is the administrator of a debt agreement; and  (c) the person does so with the intention of securing the affected creditor’s acceptance or non‑acceptance of the proposal to terminate the agreement. 185PD  Withdrawal of proposal to terminate a debt agreement  (a) a proposal to terminate a debt agreement is given under section 185P; and  (b) the applicable deadline has not arrived; and  (c) the proposal has not been accepted. Withdrawal of proposal  (a) the Official Receiver becomes aware that the relevant subsection 185P(1B) statement was deficient because it omitted a material particular or because it was incorrect in a material particular; or  (b) the Official Receiver becomes aware of a material change in circumstances that:  (i) was not foreshadowed in the relevant subsection 185P(1B) statement; and  (ii) in the opinion of the Official Receiver, is capable of affecting an affected creditor’s decision whether or not to accept the proposal; the Official Receiver may declare in writing that the proposal is withdrawn. Notification of withdrawal  (3) If the Official Receiver makes a declaration under subsection (2), the Official Receiver must give written notice of the declaration, and the reasons for it, to:  (4) If the Official Receiver decides to make a declaration under subsection (2), the debtor or an affected creditor may apply to the Administrative Review Tribunal for review of the decision. 185Q  Terminating a debt agreement by order of the Court Applying for an order  (1) Any of the following persons may apply to the Court for an order terminating a debt agreement:  (a) the debtor (or the debtor’s personal representative if the debtor has died);  (b) a creditor of the debtor;  (c) the Official Receiver. Simultaneous application for a sequestration order  (2) A creditor may include an application for a sequestration order in an application for an order terminating a debt agreement. Effect of applying for a sequestration order  (3) For the purposes of this Act, making an application for a sequestration order under subsection (2) is taken to be presenting a creditor’s petition against the debtor, but subsection 43(1), sections 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to the application. Prerequisites for making an order terminating a debt agreement  (4) The Court may make an order terminating a debt agreement if it is satisfied:  (a) that the debtor (or the debtor’s personal representative if the debtor has died) has failed to carry out a term of the agreement and that it is in the creditors’ interest to terminate the agreement; or  (b) that carrying out the agreement would cause injustice or undue delay to the creditors or the debtor (or the debtor’s estate if the debtor has died); or  (ba) that one of the following applies:  (i) the administrator of the agreement has contravened subsection 185EC(6) in relation to the relevant debt agreement proposal;  (ii) the administrator of the agreement has contravened subsection 185MC(6) in relation to the agreement, whether or not the proposal to vary the agreement was accepted;  (iii) the administrator of the agreement has contravened subsection 185PC(6) in relation to the agreement, where the proposal to terminate the agreement was not accepted; or  (c) that for any other reason the agreement should be terminated and that it is in the creditors’ interest to do so. Sequestration order  (5) If the Court makes an order terminating a debt agreement, the Court may also make a sequestration order if a creditor applied for the sequestration order. 185QA  Terminating a debt agreement—designated 6‑month arrears default  (a) the administrator of a debt agreement notifies the Official Receiver that a designated 6‑month arrears default by the debtor has occurred; and  (b) the Official Receiver is satisfied that the designated 6‑month arrears default has occurred; the Official Receiver must:  (c) declare in writing that the agreement is terminated; and  (d) record the declaration on the National Personal Insolvency Index.  (2) The debt agreement is terminated when the declaration is recorded on the National Personal Insolvency Index.