Submission: Personal Insolvency Consultation


On 1 September 2023, the Attorney-General’s Department released a discussion paper seeking views on increasing the bankruptcy threshold value from $10,000, increasing the period for a debtor to respond to a bankruptcy notice from 21 days and several other short-term, critical reforms to the Bankruptcy Act 1966 (Act).

The discussion paper (linked below) addresses two of five key issues discussed at the Attorney-General’s personal insolvency roundtable held in March 2023, in which ARITA participated.

The remaining three issues from the roundtable – focusing on options for a shorter discharge period from bankruptcy for some bankrupts, easier annulment for inappropriate bankruptcies and identifying and scoping measures to mitigate harms caused by unlicensed or untrustworthy advisers – do not form part of this discussion paper but will be considered in consultation with stakeholders at a later stage.

The specific areas of reform considered by the discussion paper are:

  • Increasing the bankruptcy threshold from $10,000 to $20,000, which the discussion paper states, “will account for macroeconomic factors such as the cost of living, wage and economic growth, the unemployment rate and inflation generally” and “aims to address concerns about the use of bankruptcy proceedings to pursue small debts, without reducing the general availability of credit in the economy”.
  • Increasing the period for a debtor to respond to a bankruptcy notice from 21 to 28 days, which would align the period with a range of other provisions in the Act and is consistent with the civil procedure rules in Federal and State legislation which usually allows for 28 days in which to respond to a statement of claim (although some jurisdictions allow for longer).
  • Reducing the permanent record on the National Personal Insolvency Index to seven years after discharge, on the basis that a seven-year period is appropriate and commensurate with the gravity of entering into bankruptcy while also balancing the interests of a discharged bankrupt.
  • Remove acts of entering into a debt agreement or having that debt agreement accepted by creditors serving as an ‘act of bankruptcy’, with the intent that it will mitigate reluctance felt by debtors who may not enter into a debt agreement because submitting a proposal is considered an act of bankruptcy.

The consultation period closes on 29 September 2023 and ARITA will be making a submission.

Attorney-General’s Department – Personal Insolvency Consultation