Federal Government

Federal Government Introduces Proposed Amendments to Bankruptcy Act

The Federal Government recently introduced the Bankruptcy Legislation Amendment Bill 2001 to Parliament.

The Bill proposes changes to the Bankruptcy Act mooted in May 2000, directed to addressing concerns that the bankruptcy system is biased towards the debtor. The proposed changes are also said to address anomalies in the Act, streamline the administration of bankrupt estates by trustees, and make it easier for trustees to impose sanctions upon uncooperative bankrupts.

The major changes proposed are:

The introduction, for most debtors, of a mandatory 30 day cooling-off period for debtors who petition for their own bankruptcy.
Giving Official Receivers a discretionary power to reject debtors petitions where there is reason to suspect that the debtor can pay all of his or her debts and the petition is an abuse of the system
The abolition of early discharge from bankruptcy
Strengthening the objection-to-discharge provisions in the Act; it is proposed to make it easier for trustees to make objections, and harder for bankrupts to challenge them
Giving the Court a power to annul bankruptcies even when the bankrupt was insolvent when he or she became bankrupt
Doubling the income threshold for debt agreements under Part IX of the Act; this will enable more debtors to choose these arrangements as an alternative to bankruptcy.

Notably, the bill also attempts to remedy the injustice that sometimes arises when a bankrupt fails to technically lodge a statement of affairs, but reasonably believes he or she has done so. The current position is that a bankrupt who does this will not be discharged until 3 years after the statement is formally lodged – meaning that the bankrupt could stay bankrupt indefinitely. Often this occurs through no fault of the bankrupt, and the Act, as it stands, leaves the Court little or no power to remedy any injustice that arises.