In our joint submission with CPA Australia, we did not support most of the Government’s proposals to reduce the stigma of bankruptcy and encourage entrepreneurship.

The proposals to reduce the bankruptcy period to one year included layers of exemptions to try and mitigate reckless and repeat bankrupts who might abuse a one-year period. The proposals would result in over eight possible bankruptcy periods. 

The proposals simply added layers of red tape without impacting the stigma associated with bankruptcy which often inhibits a person trying again. As an alternative, we proposed creating an early discharge mechanism, accessible on application by a trustee, and removing the pubic record of bankruptcy after seven years.

For debt agreements, the Government proposes extending the period out to five years and increasing the debt and income thresholds to the asset threshold. The paper did not discuss the impact on creditors or recognize they would need to replace the income lost from a debt unpaid. Equally, no data was provided to indicate that the debt or income threshold are a barrier when considering the most appropriate pathway to manage personal debt.

We called on the Government to seek evidence of the need for change by interrogating the data already held. For example, establishing the average value of past bankrupt’s debt and income. If these are below existing thresholds for debt agreements, the proposed change is unwarranted, 

Finally, we did support a bankrupt providing the name of their pre-insolvency adviser. We did not support a requirement for registered trustees to undertake enquires into that adviser. We noted that it is the Official Trustee, handling 80% of bankruptcies, that would be able to collate this information, identify persons of concern and report to the Government’s anti-phoenix taskforce.

Thank you to our members and CPA Australia for your feedback on these proposals.