The Bill to reduce the period of bankruptcy from three years to one year was introduced into Federal Parliament on 19th October 2017.
The key features of the Bill are explained below:
The bankrupt will be discharged at the end of the period of 1 year from the date on which the bankrupt filed his or her statement of affairs.
Once discharged, the bankrupt will not need to disclose his or her status as a bankrupt when applying for credit; will not need to seek permission to travel overseas and will be able to be appointed as a company director.
Income contribution obligations of discharged bankrupts will extend for at least two years following discharge (five to eight years if the bankruptcy is extended due to non-compliance).
Bankruptcies on foot at the commencement date (except those subject to an objection) will be discharged if one year has expired since the bankrupt filed a statement of affairs. If one year has not yet expired, bankruptcies will be discharged on the day after the first anniversary of the filing of the statement of affairs.
The 1-year discharge will commence 6 months after the Bill receives Royal Assent. According to the Explanatory Memorandum, this is designed to 'give trustees time to prepare any objections to discharge, and will enable relevant agencies time to consider whether a one-year licensing or professional restriction is appropriate for their purposes'.
Ongoing bankruptcies which have been extended for 5 to 8 years due to an objection to discharge will remain unchanged. The ability of a trustee or the Official Receiver to lodge an objection to discharge (before the first anniversary of the bankruptcy) will remain unchanged.
Rodgers Reidy comment:
Rodgers Reidy expects that the effect of the changes will be that more people will declare bankruptcy rather than try to struggle through - especially if they have minimal assets. This may equate to less people trying to enter into Debt Agreements to settle their debts over a longer period. Australia has a history of punishing financial failure. Changing the legislation to allow one year bankruptcies, together with the recent "Safe Harbour" amendments to the Corporations Act, show a new attitude by the legislators to encourage entrepreneurialism. No doubt however, there will be a wave of protest when a high profile individual is declared bankrupt and portrayed to be taking advantage of our weak bankruptcy laws.
Read the Bill and the Explanatory Memorandum