What is a Part 4 Scheme?
If a bankrupt person wishes to finalise their situation early, they can propose an offer to their creditors under Part 4 of the Bankruptcy Act. If the offer is accepted at a meeting of creditors the bankruptcy is annulled and replaced by the alternative arrangement creditors have agreed to, this is called a Part 4 Scheme.
The main attributes of a Part 4 Scheme are:
- Gives flexibility for persons who are bankrupt, should their circumstances change during their bankruptcy.
- The protection from creditors that the agreement provides can continue.
- Provides the opportunity for the involved person to finish their bankruptcy early.
- Removes the restrictions of not being able to be trustee of a self-managed super fund or director of a company.
- Provides a better outcome for creditors than would be expected from bankruptcy.
Further Reading: To find out more about a Part 4 Scheme, we recommend our article 'Bankruptcy and Part 4 Composition' or 'Scheme of Arrangement' here