Groundbreaking changes to bankruptcy law introduced to Parliament
On 19 October 2017, a groundbreaking Bill was introduced to Federal Parliament that, if passed, would see significant changes to existing bankruptcy law.
Under the Bankruptcy Amendment (Enterprise Incentives) Bill 2017, the boldest change would see the length of bankruptcy slashed to one year, down from the current minimum discharge time of three years.
The Explanatory Memorandum to the Bill identifies the main considerations in amending the bankruptcy laws to be:
- encourage entrepreneurship;
- reduce the stigma of bankruptcy;
- savings in the vicinity of $4 million per annum.
Once a bankrupt is discharged they will no longer be required to disclose their bankruptcy status when applying for credit or obtain their trustee’s permission to travel overseas. The prohibition to be a company director will also dissolve upon discharge.
It should be noted that income contribution obligations for discharged bankrupts will remain for at least a further two years following discharge.
If the Amending Act is passed, a six-month transition period is proposed once the Bill is made law. Existing bankrupts will be able to take advantage of the amendments (assuming no objection has been made to their discharge). They will be discharged once one year has expired since their statement of affairs was filed.
The amendments represent a huge shift in the law that will likely see an increase in bankruptcies. This means that for those offering credit they should ensure their terms and conditions of trade and Personal Property Securities Registrations are current and where possible the debt is secured.
DSS Law has extensive experience advising insolvency practitioners, businesses and individuals in relation to the issues surrounding bankruptcy and is well placed to advise in relation to the proposed amendments.
DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on 1300 DSS LAW or firstname.lastname@example.org.