Bankruptcy law reforms

The Attorney-General has announced that the Australian Government will introduce bankruptcy law reforms including:

  • Increasing the threshold for involuntary bankruptcies from $10,000 to $20,000, with the threshold to be indexed each year;
  • Increasing the timeframe in which a debtor may respond to a bankruptcy notice from 21 days to 28 days;
  • Reducing the period a discharged bankruptcy is publicly recorded on the National Personal Insolvency Index to seven years following discharge from bankruptcy; and
  • 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.

It appears that the current default period of bankruptcy before a bankrupt is discharged from bankruptcy will remain at three years but a shorter discharge from bankruptcy has been identified as a long-term reform priority.

Minimal Asset Procedure

However, the Attorney-General’s Department has commenced consultation on a Minimal Asset Procedure in Australia, allowing debtors with no way to repay their debts (i.e., low income and low asset debtors) to be discharged more quickly.

The potential elements of a Minimal Asset Procedure in Australia are:

  • there would be a maximum debt threshold of $50,000 to enter the Minimal Asset Procedure;
  • the Minimal Asset Procedure would last for 12 months, with a period of 4 years post-discharge to be listed on the National Personal Insolvency Index;
  • a maximum threshold for income would be determined for eligibility for entry into a Minimal Asset Procedure;
  • a maximum threshold of $10,000 in assets with exceptions for tools of trade and a vehicle to be eligible for entry into a Minimal Asset Procedure;
  • a debtor may only enter into a Minimal Asset Procedure once during their lifetime, and
  • a Minimal Asset Procedure should be less onerous than a bankruptcy.

If you found this article helpful, then subscribe to our news emails to keep up to date and look at our video courses for in-depth training. Use the search box at the top right of this page or the categories list on the right hand side of this page to check for other articles on the same or related matters.

David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

Print Friendly, PDF & Email

Your Compliance Support Plan

We understand you need a cost-effective way to keep up to date with regulatory changes. Talk to us about our fixed price plans.