Submission update: Bankruptcy Law Reform
08/07/2024
The
Attorney-General, the Hon Mark Dreyfus KC MP, announced today that the
Government will introduce reforms to ensure Australia’s bankruptcy system is
fairer and operates in the best interests of all Australians, including
reducing the stigma currently associated with entering into bankruptcy.
The
changes were consulted on late last year and ARITA’s submission noted the
following concerning each of the key changes:
|
Change
|
ARITA comment (September 2023)
|
|
Increasing the threshold for involuntary bankruptcies from $10,000 to $20,000, with the threshold to be indexed each year.
|
ARITA does not object to the proposal, but notes that some credit providers may reconsider their lending practices as a result.
|
|
Increasing the timeframe in which a debtor may respond to a bankruptcy notice from 21 days to 28 days.
|
ARITA acknowledges the benefit in aligning the period but suggests that ordinary days should be amended to refer to the equivalent 20 business days.
|
|
Reducing the period a discharged bankruptcy is publicly recorded on the National Personal Insolvency Index to seven years following discharge from bankruptcy.
|
ARITA supports the proposal that the permanent record be consistent with the period of the trustee’s appointment but notes that any further reduction would not be appropriate.
|
|
Removing the proposal, or acceptance, of a debt agreement as an act of bankruptcy for the purposes of subsection 40(1) of the Bankruptcy Act.
|
ARITA agrees that the giving of a proposal and acceptance of a debt agreement should not serve as acts of bankruptcy, but believes that where a proposal is given to creditors and it is not accepted, then it should serve as an act of bankruptcy for creditors with a debt or debts of at least the bankruptcy threshold amount.
|
Further consultation: Minimal Asset Procedure
In
addition, further consultation has commenced on the introduction of a Minimal
Asset Procedure in Australia.
As
noted in the Attorney-General’s announcement, "a Minimal Asset Procedure would
clear a person’s debts and allow access to a fresh start sooner than a
bankruptcy, where that person has no other way to pay. Importantly, it should
also leave creditors no worse off – meaning Australia’s personal insolvency
system remains fair and balanced".
A no asset procedure (NAP) has been
in operation in New Zealand since 2007 and appears to work well. A NAP is a
once-off procedure available to debtors who owe less than NZ$50,000, have no
assets and have no extra money to make repayments towards their debt.
Submissions
for the consultation on a Minimal Asset Procedure in Australia close on 29 July
2024 and we invite members to provide feedback for inclusion in ARITA’s
submission to [email protected] by 25 July 2024.
Read
the discussion paper: Personal Insolvency Consultation – Minimal Asset Procedure.
Capital Gains Tax in bankrupt estates
ARITA continues to raise concerns regarding capital gains
tax in bankrupt estates, which members who work in personal insolvency continue
to say is the most significant issue in bankruptcy at this time.