In the constant pursuit of a fairer system for all, on 8 July 2024, further reforms to Australia’s bankruptcy regime were announced for introduction.
The key areas for change are briefly summarised as follows:
- 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.
An additional area of reform has been identified with industry consultation invited : the introduction of a Minimal Asset Procedure in Australia.
The “one year bankruptcy” has been floated several times over the years and in the Bankruptcy System Options Paper released by the Attorney-General’s Department back in January 2023, it was back on the table again, but (as has historically been the case) it didn’t garner enough industry support and was buried.
Representing an alternative option to traditional bankruptcy, the Minimal Asset Procedure does have the 12 month duration, lending some weight to the suggestion that this is the “compromise” to the one year bankruptcies that can’t seem to get the traction without industry support. The Minimal Asset Procedure would be available to a debtor contemplating a voluntary bankruptcy who has no more than $50,000 in debt. Distinguishing it from bankruptcy are other features including a maximum asset allowance of $10,000 (ie no assets or interests in assets exceeding a value of $10,000) and a 12 month duration. Clearly targeting much smaller bankruptcies which (were a trustee to be appointed) would not result in any return to creditors, this alternative option would clear an individual’s debts and an end to the process much sooner than the traditional 3 year bankruptcy.
Personal insolvency and the bankruptcy regime under the Bankruptcy Act 1966 is a complex area of law. Advice is best sought from specialists in the industry.
