• Payments had been redirected for over 3 months. In one instance the payments to the Trustee were going to total $1,500 by the time the payment plan was going to be completed.

• The Trustee had had no intention of filing the Part IX Agreement in the immediate future (this is a contentious point that a Trustee would argue). These payments were not going to be distributed to creditors.

• In one instance when we reviewed the debtors assets & liabilities it was startlingly obvious to us that a Part IX agreement would never be accepted with the debtor having "negative" capacity to live, before taking into consideration outstanding debts.

• In another instance, our client was the only creditor and we would reject any Part IX Agreement on their behalf as we would happily accept the same arrangement without the Trustee charging there $1,500 (and avoid unnecessarily reducing the payments received by our client)

Note that we are still able to pursue the debtor for payments as no Bankruptcy had been lodged, yet the debtor was following the registered (proposed) Trustees direction. When advising the debtors of our right to still pursue this debt through the courts, the debtors advise that the Trustee advised them this will be "fixed up" once the Bankruptcy is lodged.

Our immediate question was what was the debtor actually paying the Trustee for??

The answer is a "preparation" fee for preparing a Bankruptcy (in this instance a Part IX). The Bankruptcy Act allows for charges for preparing Bankruptcies - however the preparation of a Part IX debt agreement is a simple & straight forward process (we believe the Act was allowing this for complex schemes of Arrangement that are complex & involved).

We formed the view that this was the Trustee acting very unscrupulously, using the Bankruptcy Act for something that was unintended. The Bankruptcy Act affords little or no protection from Trustees acting in this manner for debtors who do not know how the system works.

We subsequently phoned ITSA to see if we could register a complaint (in the example where our client was the only creditor), and were advised that only the Debtor could make a formal complaint. In the telephone conversation ASIC agreed & were sympathetic with the points we raised, yet there was nothing they could do. They made the comment that with all the advertising for Part IX debt agreements this was becoming more common.

Perhaps we will see some reform in this area in the coming years......