The Attorney General’s Department has released a Discussion Paper on Personal Insolvency rule changes.

The proposed changes include:

• an increase to the minimum amount of debt that can trigger bankruptcy (“the bankruptcy threshold”) from $10,000 to $20,000;
• an increase to the timeframe a debtor has to respond to a bankruptcy notice from 21 days to 28 days;
• a reduction in the period of time for which a discharged bankrupt is recorded on the National Personal Insolvency Index (NPII); and
• amending the Bankruptcy Act so that an ‘act of bankruptcy’ is not taken to have occurred where a debtor submits a debt agreement proposal to the Official Receiver, or where a debt agreement proposal is accepted by creditors.

During the COVID-19 pandemic, temporary amendments were made to the Bankruptcy Act including increasing the bankruptcy threshold from $5,000 to $20,000. The temporary measures ended on 31 December 2020. On 1 January 2021, the bankruptcy threshold permanently changed to $10,000.

The department considers that an appropriate bankruptcy threshold value should ensure bankruptcy remains an option of last resort while minimising the opportunities for debtors to continue to incur additional unmanageable debt.

It encourages the use of alternative personal insolvency options for lower value debts, noting the significant and potentially lifelong impacts of bankruptcy and the relatively small amount returned to creditors through bankruptcy processes.

The department also proposes removing the NPII record seven years after a person has been discharged from their bankruptcy so that it is no longer appears publicly (noting that the period for
bankruptcy is currently three years, this reform would mean a public record period totalling 10 years unless the bankruptcy was extended).

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Author: David Jacobson
Principal, Bright Corporate Law
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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.