Commonwealth Attorney-General, Robert McLelland, confirmed a number of the key reforms in Australia’s personal bankruptcy laws, in a media release today.
The Bankruptcy Legislation Amendment Bill 2009, Mr McLelland said, modernises personal insolvency arrangements by enhancing flexibility and fairness in the system by ensuring people are not made bankrupt over relatively small debts.
Reforms
The Bill introduces a number of key reforms, including:
- increasing the minimum amount for which a creditor can petition for bankruptcy from $2,000 to $5,000;
- increasing the stay period before a creditor can commence action to recover debts from seven to 21 days;
- increasing the income, asset and debt thresholds to allow more people in financial distress to enter into voluntary debt agreements;
- introducing a more efficient and transparent process for fixing and reviewing trustee remuneration;
- strengthening the penalties for some offences, particularly those involving fraud;
- enhancing powers for the Inspector-General in Bankruptcy to investigate possible offences.
Government motivation
Mr McLelland said in a media release that:
“These reforms will ensure that bankruptcy is perceived as a last resort, for both debtors and creditors, rather than as simply another instrument of debt collection.”
“The amendments will give those in financial distress a more realistic opportunity to consider their options, reorganise their affairs and where possible, avoid bankruptcy,”
The government has said that it recognises as a fact that the majority of bankruptcies now relate to consumer debts and involve people with relatively few assets and little income, rather than unscrupulous debtors trying to avoid paying their debts.
Impact on creditors
These reforms will result in a need to:
- review lending practices particularly in assessment of applications for credit;
- review the appetite for risk in lending books in light of the changes;
- reconsider security that might be sought or obtained;
- revise enforcement practices and protocols in light of the new limits;
- ensuring trustee remuneration, its calculation, application and communication of this is clearly communicated within the terms of the new regime;
- relook at the voluntary debt agreement scheme and it application, utilisation by debtors and participation by creditors.
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© DibbsBarker 2010
