But not plain sailing for everyone.
You may recall that way back in October 2017 the government introduced the Bankruptcy Amendment (Enterprise Incentives) Bill to amend the Bankruptcy Act 1966 to reduce the automatic bankruptcy period from three years to one year. The Bill lapsed in 2019 but was still floating around the halls of government and the Attorney-General has put it back on the table by seeking submissions to reform the Bankruptcy Act in relation to:
- Reducing bankruptcy to one year.
- Promoting debt agreements.
- Targeting untrustworthy advisors.
However, it is not all plain sailing for those facing bankruptcy! The government is particularly interested in getting stakeholders thoughts on excluding bankrupts from being eligible for a one-year bankruptcy where in the last 10 years they have:
- been bankrupt
- been banned as a director
- had their bankruptcy extended through an objection to discharge
- have been convicted of certain offences.
This is proposed to be staged such that if the reform becomes effective and you’ve already had a one-year bankruptcy in a 10-year period, then any future bankruptcy will be two years. If you go bankrupt again in the next 10 years, then it will be three years. After that (hopefully very few get to that!) it resets to one year.
Been banned as a director
No staging here; the bankruptcy is automatically three years. However, those automatically banned as a result of going bankrupt get the one, two, or three years outlined above.
Had a bankruptcy extended through an objection to discharge
So, if you had been bankrupt in the last 10 years and the bankruptcy trustee objected to your automatic discharge from bankruptcy, then you’re not entitled to the one-year bankruptcy.
Have been convicted of certain offences
If you had been convicted of a Bankruptcy Act or fraud-related offence you are straight to the maximum three years.
Promoting debt agreements & targeting untrustworthy advisors
The government is concerned about the reduction in Part IX, debt agreements use. National volumes reduced from 11,549 in the 2018-19 period, to 3,731 in the 2020-21 period. No doubt some of the reduction has been as a result of the government’s and major lender’s financial responses to the pandemic. However, since the numbers have not materially increased, consideration is being given to:
- extending the time limit on debt agreements from three years to five years
- increasing the debt and income eligibility thresholds (currently $121,030 and $90,772.50 respectively) to match the asset eligibility threshold (currently $242,060)
- reducing the exclusion period from 10 years down to 7 years for those who have previously been bankrupt, in a debt agreement, or a Part X, personal insolvency agreement,
- proposing that a debt agreement will not be an ‘act of bankruptcy’.
In an effort to further detect and stamp out pre-insolvency advice by untrustworthy advisors the Attorney-General is seeking stakeholder views on expanding the Bankruptcy Act to:
- Require bankrupts to disclose details of pre-insolvency advice.
- Require registered bankruptcy trustees to make enquiries about pre-insolvency advice and provide that information to the Australian Financial Security Authority (AFSA).
- Include making it an offence to advise, instruct, assist, or counsel any person to commit or attempt to commit the already existing Bankruptcy Act offences.
Details of the consultation can be found here, with submissions closing on 25 February 2022.