Changes in Bankruptcy law in Australia post 2021
A legal process declaring that one is unable to pay his debts is called Bankruptcy. It can give relief from paying from most of the debts. In Australia, personal insolvency is regulated by The Bankruptcy Act, The Bankruptcy Regulations 2021 and the Insolvency Practice Rules (Bankruptcy) of 2016. It also provides a basic framework to settle the manageable debts by realisation of assets and pay back to creditors and to discharge the unmanageable debts.
The Bankruptcy Regulations 1996 of Australia helps the administrative requirements of the Act. It is a procedural law such as the administration of bankruptcies, debt agreements and other formal insolvency options. The Bankruptcy Act gives relief to insolvent individuals with basic idea to resolve their personal inadequacy through bankruptcy, debt agreements and personal insolvency agreements. Bankruptcy is a legal process where a court declares or you declare bankruptcy when you are unable to pay your debts. A Debt agreement gives assets and income as an alternative to bankruptcy to an insolvent individual who have low to moderate levels of debt, while providing a return to creditors. The personal insolvency agreements are legally binding agreements by which the debts between a debtor and their creditors will be settled without becoming bankrupt.
The Australian Financial Security Authority is the authoritative agency for the administration and regulation of bankruptcy in Australia. It provides the information, regulation and enforces the norms related. They are Information regarding bankruptcy, information on debt agreements, Personal Insolvency agreement, unmanageable personal debts and how the complaints are processed and personal insolvency in the context of Coronavirus.
Recent changes to the bankruptcy system in Australia
A review was conducted in 2019 the Attorney General’s Department stated that the existing regulations are necessary and required to remake it with minor and technical amendments to improve administrative inefficiencies. The new Bankruptcy Regulations in Australia were made in 1 April 2021. It is to maintain most of the norms with a considerable change and technical amendments. It is aimed to modernise and ensure alignment with the Bankruptcy Act. The Bankruptcy Regulations gave many administrative requirements for Bankruptcy Act that are necessary for the efficient administration of bankruptcies, debt agreements and other formal personal insolvency.
A bankruptcy threshold of personal bankruptcy was permanently changed to USD 10,000 on 1 January 2021. The USD 10,000 threshold account was previously increased to USD 5,000 in 2010. The increase of the threshold to $10,000 raised a concern about the use of bankruptcy proceedings regarding the small debts. The concern was raised based because of the less availability of credit in the economy. A temporary threshold of USD 20,000 which the Australian Government implemented as part of its response to the COVID-19 pandemic in March 2020 was replaced a temporary threshold of USD 10,000. The bankruptcy threshold of USD 10,000 applies to the issued bankruptcy notices or to the creditors' petitions given on 1 January 2021 or after this date.
The Australian Government gave temporary relief in bankruptcy laws as part of its economic response to the COVID-19 pandemic on 24 March 2020 and these changes ceased on 31 December 2020. The temporary relief was increased the level of debt which can make someone bankrupt was raised from USD 5,000 to USD 20,000. The timeframe for a debtor to respond to a bankruptcy notice was raised from 21 days to 6 months. The temporary debt protection period was raised from 21 days to 6 months.
Amendments made in Bankruptcy Act
There are only minor and technical amendments to the existing Act. They are aimed to modernise and ensure alignment with Act. It also aims to clarify the confusions and administrative inefficiencies occurred in the past. The Minor amendments made in the Bankruptcy Act include:
- The section 72 replaced by the approval form with the current regulation 12.01 statement which required for paying money to the Consolidated Revenue Fund.
- The Schedule 8 of the 1996 regulations was split into separate sections that are from section 75 to 78.
- To treat the foreign currency proof of debts a new section 24 was added.
- Removing the out dated definitions and references, which includes the legislative schemes and Individual industrial agreements which have since been repealed
- Ensuring the provisions which stipulate time requirements consistent with those in the Act, to provide certainty to users.
- Providing for the Act and the new Regulations to be administered in a technology-neutral manner to reflect current practices.
- Minor amendments to reflect changes to the Office of Parliamentary Counsel drafting practices.
Conclusively, the amendments are minor and aimed at modernise and ensure the alignment with the Bankruptcy Act 1966. The key changes are adding new sections and altering several sections for implementing forms to submit the consolidated revenue fund, implementing new sections to deal with foreign currency proof of debts, the threshold of personal bankruptcy was permanently changed to USD 10,000. The efficient administration of bankruptcies, debt agreements and other formal personal insolvency options will be governed by the Bankruptcy Act.