The Bankruptcy Amendment (Debt Agreement Reform) Bill 2018 has been introduced into the House of Representatives to reform Australia’s debt agreement system.
The Bill makes provision for:
- the types of practitioners authorised to be debt agreement administrators;
- registration, deregistration and the obligations of debt agreement administrators;
- changing the threshold for debt agreements;
- formation, administration, variation and termination of debt agreements;
- protections against debt agreements that cause financial hardship or have other defects; and
- powers of the Inspector-General in Bankruptcy (Inspector-General) with respect to debt agreements and debt agreement administrators.
The majority of amendments in the Bill will commence six months after Royal Assent.
The purpose of the registration system is to ensure that debt agreement administrators have the knowledge, skills and attributes to professionally undertake their role. Only a registered debt agreement administrator, registered trustee or the Official Trustee will be authorised to administer a debt agreement. A debtor cannot administer their own debt agreement unless they are a registered debt agreement administrator or registered trustee.
Currently, the Bankruptcy Act prevents a debtor from giving the Official Receiver a debt agreement proposal if, at the proposal time, the value of the debtor’s property that would be divisible among creditors if the debtor were bankrupt (assets threshold) is more than the threshold amount. As of November 2017, this amount is $111,675.20.
Due to the recent rises in Australian property prices, particularly in capital and major cities, the current threshold amount prevents a significant proportion of Australians from accessing the debt agreement system. The Bill therefore doubles the threshold amount to ensure a greater proportion of debtors have access to the debt agreement system.
The Bill also provides that a debtor cannot give the Official Receiver a debt agreement proposal if the total payments under agreement exceed the debtor’s income by a certain percentage. The Minister can determine this percentage by legislative instrument
The Official Receiver will be refuse to accept a debt agreement proposal for processing if the Official Receiver reasonably believes that complying with the debt agreement would cause undue hardship to the debtor.