Changes to Personal Bankruptcy Laws Reflect Change in Economic Climate
Attorney-General, Robert McClelland has recently released details of proposed changes to existing personal bankruptcy legislation.
The changes are now available for public consultation and are intended to modernise the current legislation to better reflect what is actually happening in the community. Specifically, it is addressing the fact that we are increasingly seeing a larger number of bankruptcies in relation to consumers with a small amount of assets and low income levels. Where previously bankruptcy was more commonly associated with individuals who were often simply attempting to avoid paying their debts, bankruptcy is now being increasingly accessed by those who have simply found themselves having a hard time financially.
Some major items of the proposed changes include:
• increasing the minimum debt for which a creditor can petition for bankruptcy from $2,000 to $10,000;
• increasing the stay period from when a declaration of intent to file a debtor’s petition is filed to when a creditor may commence action to recover debts from seven to 28 days; and
• increasing the income, asset and debt thresholds to allow more people in financial distress to enter into voluntary debt agreements.
In essence, the Bankruptcy Legislation Amendments Bill 2009 aims to promote proactive discussion, negotiation and remedies. This should see that honest debtors are given a legitimate opportunity to sit down with their creditors and make arrangements for the repayment of debts and creditors are satisfied that they will receive the monies that are due to them without the need to send excessive numbers of individuals bankrupt.
In light of that, the Bill also seeks to toughen the penalties in relation to fraud and other bankruptcy offences so that insincere parties cannot take advantage of the new conditions that are favourable for those who are actually in trouble.
Due to the recent events in both the global and local economic climates it follows that there are more consumers and individuals who are experiencing financial difficulty than in previous times. The introduction of changes to personal bankruptcy laws will hopefully assist those in trouble to find alternative means to get back on their feet and get their financial affairs in order. It is not ideal for the individuals, the creditors or the country as a whole to see increasing numbers of the population have to formally file for bankruptcy so the Government is using the legislation reforms to aid in the reduction of potential bankruptcy figures which were up by 11% for the last financial year when compared with the previous financial year.
In a recent interview Mr McClelland pointed out that on average a debt agreement would see the creditor receive around 76 cents for every dollar that they were owed. In comparison, where the path of bankruptcy is taken the creditor is usually lucky to receive 1.6 cents in the dollar. In the case of bankruptcy, not only does the creditor lose out but the individual will have a record of debt against this creditor and this will almost certainly affect future borrowing capabilities.
The team of lawyers and accountants at The Quinn Group are available to offer advice on a range of credit and debt situations from negotiating with creditors and debtors to administering the bankruptcy if that is required. For more information and advice contact us on 1300 QUINNS or visit our website www.quinns.com.au and submit an enquiry.