Personal Insolvency Consultation

Overview

On 2 March 2023, the Attorney-General, the Hon Mark Dreyfus KC MP, convened a national Roundtable (Roundtable)¹ with key stakeholders across all sectors of the personal insolvency system to better understand the pressure points and potential key areas for reform.

The Roundtable brought together 24 organisations from a wide range of sectors with an interest in personal insolvency, including credit, finance, accounting, legal sectors and consumer groups. The Roundtable provided an opportunity for practitioners and groups representing both creditor and debtor interests to engage directly with Government to provide an opportunity for dialogue between key stakeholders on personal insolvency priorities and emerging issues, and to increase effective collaboration between Government and key stakeholders in the development of personal insolvency law reform.

The following five key issues were discussed at the Roundtable:

• increasing the bankruptcy threshold value from $10,000;
• increasing the period for a debtor to respond to a bankruptcy notice from 21 days;
• options for a shorter discharge period from bankruptcy for some bankrupts;
• options for easier annulment for inappropriate bankruptcies; and
• options to identify and scope measures to mitigate harms caused by unlicensed or untrustworthy advisers.

Of these five key issues, the Attorney-General’s Department (the department) considers that the first two issues listed above to be priority reforms to progress in the short-term. This discussion paper seeks views on the proposals relating to these issues, and several other short-term, critical reforms to the Bankruptcy Act 1966 (Bankruptcy Act). The remaining issues identified at the Roundtable will require further analysis and do not form part of this discussion paper, but will be considered in consultation with stakeholders at a later stage.

In developing this paper, the department took into consideration views expressed by stakeholders at the Roundtable, previous submissions made to the department on these issues, and data provided by the Australian Financial Security Authority (AFSA).

The department also notes the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into Corporate Insolvency in Australia released its report on 12 July 2023, and that this report contained recommendations relevant to personal insolvency. The department is considering its response to this report.

Why we are consulting

The Bankruptcy Act regulates Australia's personal insolvency system. It creates a framework to allow people in severe financial stress to discharge unmanageable debts while providing for the realisation of a debtor's available assets for distribution to affected creditors.

The department is seeking stakeholder submissions on targeted short-term reform opportunities to inform its ongoing efforts to improve the personal insolvency system. These opportunities include issues identified as priorities through the Roundtable, and other proposals the department considers require short-term action. These matters are:

• an increase to the bankruptcy threshold from $10,000 to $20,000;
• an increase to the timeframe a debtor has to respond to a bankruptcy notice from 21 days to 28 days;
• a reduction in the period of time for which a discharged bankrupt is recorded on the National Personal Insolvency Index (NPII); and
• amending the Bankruptcy Act so that an ‘act of bankruptcy’ is not taken to have occurred where a debtor submits a debt agreement proposal to the Official Receiver, or where a debt agreement proposal is accepted by creditors.²

Who we want to hear from

The department is seeking submissions from stakeholders on the issues raised in this consultation. The consultation includes questions to guide feedback. However, stakeholders are welcome to provide further information and suggestions relevant to each topic of this consultation.

While the consultation is open to all members of the public, the department would particularly like to hear from small business and consumer advocates, insolvency practitioners and peak industry organisations.

Submissions can be made through Citizen Space. Please note that the department will not publish your submission if you asked for it to remain confidential, or if the department considers (for any reason) that it should not be made public. We may redact parts of published submissions, as appropriate. Read our privacy policy to find out more.

If you have any questions about the consultation process, please email bankruptcy@ag.gov.au.

• Personal Insolvency Discussion Paper 2023 [PDF 352KB]
• Personal Insolvency Discussion Paper 2023 [DOCX 331KB]

Endnotes

1. Ministerial Roundtable on Personal Insolvency: summary
2. Paragraphs 40(1)(ha) and 40(1)(hb) of the Bankruptcy Act 1966 (Cth).