Date posted: 30/04/2020 4 min read

Temporary changes to Australia's personal insolvency law

The Australian Government has made temporary legislative changes to bankruptcy law which will be in place for six months

In Brief

  • Temporary changes have been made to bankruptcy law in Australia as a result of COVID-19
  • Register personal property security agreements on the Personal Property Securities Register (PPSR)
  • The Australian Financial Security Authority (AFSA) administers the personal insolvency system

The Australian Government has made changes to bankruptcy law as a result of the COVID-19 pandemic and its associated economic impacts.

The temporary changes are:

  1. The debt threshold for creditors to apply for a Bankruptcy Notice against a debtor will increase from A$5000 to A$20,000.
  2. The timeframe for a debtor to respond to a Bankruptcy Notice before a creditor can commence bankruptcy proceedings will increase from 21 days to up to six months.
  3. The temporary protection period available for debtors to prevent recovery action by unsecured creditors will increase from 21 days to six months.

These temporary changes will be in place for six months from 25 March 2020.

For more information about the legislative changes, see the Australian Government factsheet: Economic response to the COVID-19: Temporary relief for financially distressed businesses.

Personal insolvency options for debtors

The Australian Financial Security Authority (AFSA) administers the personal insolvency system. While noting that seeking hardship relief from creditors should always be considered before formal insolvency options, AFSA's website has options for dealing with personal insolvency and provides much information about their consequences under the Bankruptcy Act 1966.

Information for creditors

The reduced values of personal assets and incomes resulting from COVID-19 means that creditors in many personal insolvency administrations are less likely to receive dividends and may wait longer for them when they do arise.

Creditors should contact the respective trustee or administrator regarding the prospect of receiving a dividend. If any creditors are dissatisfied with the trustee or administrator in any respect, they should raise their concerns with the trustee or administrator in the first instance. If they remain dissatisfied, creditors should raise their concerns with AFSA by using AFSA's online feedback form.

Untrustworthy advisers

With increased levels of debt for Australians, there is an added risk that they may turn to untrustworthy advisers who may exploit vulnerable people in financial crisis.

You can confidentially raise your concerns about untrustworthy advisers, wrongdoing, criminal misconduct or fraud in respect to practitioners, bankrupts, debtors, creditors or the misuse of the Personal Properties Securities Register (PPSR).

PPSR

The PPSR is a national online register that can provide information to help protect consumers before they buy personal property such as cars, boats. The PPSR allows consumers to find out before they buy if there are any security interests held against personal property items. The register is administered by AFSA.

Businesses have 20 days to register a security agreement (even less for some transactions) when dealing with another business and it is important that security interests are correctly registered on the PPSR.

Businesses that lend money, offer trade credit, leasing goods or take security over personal property are reminded that their interest vests in the insolvent business (where the security is held) on winding up or administration if security interests are not correctly registered.

If businesses miss this registration timing window, their registration is only enforceable if the grantor-company survives the next six months.

We encourage businesses (and advisers) to register as soon as possible to maximise protection.

For information on PPSR, including how to make a registration and the rules around timing visit the PPSR website.

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AFSA website

The Australian Financial Security Authority (AFSA) is an executive agency in the Attorney-General's portfolio.

Click here

AFSA's online feedback form

Contact AFSA Regulation and Enforcement of the AFSA

Click here

PPSR business guide - second edition

For information on PPSR, including how to make a registration and the rules around timing

Click here

For more information about the legislative changes

See the Australian Government factsheet: Economic response to the COVID-19: Temporary relief for financially distressed businesses

Click here