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.

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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.