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Personal Insolvency & the Law
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The Federal Government is committed to the ongoing examination of the personal insolvency system to improve its effectiveness. This examination involves a process of ongoing consultation with those involved in the system.
Suggestions on how Australia's personal insolvency system can be improved should be forwarded to the Assistant Secretary, Bankruptcy Policy Branch in the Attorney-General's department (http://www.ag.gov.au/bankruptcy)
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| LEGISLATION: | | | | |
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| AMENDMENTS: | | | | |
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LEGISLATION
| Primary Bankruptcy Legislation |
Please view the compilation for the most current legislation.
| Primary Legislation Instruments |
| Amendments to the Bankruptcy Regulations 1996 - trustee remuneration and infringement notices |
The Bankruptcy Legislation Amendment Bill 2009 was passed on 24 June 2010.
One of the objectives of the Bill is to provide a more streamlined process for fixing trustee remuneration and a more transparent process for reviewing that remuneration. While the Bankruptcy Act 1966 itself will set down the broad framework of the remuneration regime, it is intended that much of the detail about how the new trustee remuneration regime will operate will be contained in amendments to the Bankruptcy Regulations 1996.
This Bill also introduces an infringement notice regime for some offences under the Act. This regime will apply to strict liability offences and is an alternative to prosecution. Details are available at: http://www.ag.gov.au/bankruptcy
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| Amendments to the Bankruptcy Regulations 1996 Banktruptcy Amendment Regulations 2010 (No.1) |
Amendments to the Bankruptcy Regulations took effect on 1 August 2010.
http://www.comlaw.gov.au/ComLaw/Legislation/LegislativeInstrument1.nsf/asmade/bytitle/A55F71859CDA82FBCA2577530081FA3E
A summary of the amendments follows: Amendments to the Bankruptcy Regulations
| Trustee Remuneration Review |
On 22 May 2008 the Attorney-General Robert McClelland released a proposals paper relating to registered trustees’ remuneration.
Stakeholders made submissions on the proposals and these were taken into account in developing a package of reforms.
The Government has approved changes to the legislation based on these reform proposals.
The changes are outlined in the attached paper and are intended to make the process for fixing and claiming trustee remuneration more transparent and efficient, and to reduce disputes relating to remuneration.
On 27 July 2006 the then Attorney-General Philip Ruddock announced a review of the offence provisions in the Bankruptcy Act 1966 (the Act). This review was undertaken by ITSA and the Attorney-General’s Department. The purpose of the review was to:
- ascertain whether the offence provisions are consistent with community standards and expectations in relation to behaviour which merits punishment in the context of bankruptcy;
- consider the appropriateness of the penalties for contravention of the offences (including in the context of penalties for similar offences contained in other legislation); and
- identify any legislative changes which would improve the operation of the provisions.
A Discussion Paper was released in July 2006. Stakeholders made submissions on the issues raised in the Discussion Paper. A Report on the submissions was released, and in July 2007 comments were sought on a package of reform proposals.
The Government has approved changes based on these reform proposals. These changes are intended to promote compliance with obligations under the Act; to ensure consistency amongst the penalties in the Act, and to align bankruptcy penalties with penalties for similar offences in other legislation; and to clarify and strengthen the Inspector-General’s powers to investigate offences.
The proposals include:
- introducing an infringement notice regime for the majority of strict liability offences contained in the Act, as well as introducing limited new offences of strict liability;
- introducing a provision that would allow the Official Receiver to issue a notice requiring the bankrupt to file the Statement of Affairs, and would create an offence for failing to comply with the notice;
- increasing the penalties for some bankruptcy offences to bring them into line with other penalties in the Act, and with penalties for similar offences contained in state and territory crimes legislation;
- applying limited offences to the Act’s debt agreements regime;
- clarifying the Inspector-General’s role in relation to the investigation of offences;
- giving the Inspector-General information-gathering powers similar to the Official Receiver’s powers under paragraph 77C(1)(a) of the Act; and
- technical amendments designed to harmonise the offences in the Act with the general principles of criminal responsibility set out in Chapter 2 of the Criminal Code.
AMENDMENTS
| Bankruptcy Legislation Amendment Act 2010 (No.106) | |
The Bankruptcy Legislation Amendment Bill 2009 received the Royal Assent on 14 July 2010.
This means there will be significant changes to several aspects of personal insolvency law under the Bankruptcy Act 1966 in accordance with the following table:
| Schedule and Contents | Summary of provisions | Commencing |
Schedule 1
Registered Trustee Remuneration |
Minimum remuneration entitlement increased to $5,000
New remuneration approval and review procedures |
Upon Proclamation
1 October |
Schedule 2
Offences |
Increased penalties
Infringement Notice scheme
Increased investigation powers |
Upon Proclamation
1 October |
Schedule 3
Bankruptcy Districts. |
Removal from Act |
Day after the Act receives Royal Assent
15 July |
Schedule 4 Part 1
Increase in minimum debt to support a Bankruptcy Notice and Creditor’s Petition |
Change to Bankruptcy Notice and Creditor’s Petition provisions increasing the minimum debt from $2,000 to $5,000 |
28 days after Royal Assent
11 August |
Schedule 4 Part 2
Declaration of Intention
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Declaration of Intention Stay period – change from 7 to 21 days
Declaration of Intent to be accompanied by Statement of Affairs (s54A)
Notification of creditors (s54C)
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Upon
Proclamation
1 October
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Please note that the proposed amendments to increase the eligibility thresholds for debt agreements by 20% were removed.
Information sessions for external stakeholders on how these changes will work in practice have been distributed to stakeholders. Session dates and a nomination form may be found here or contact ITSA Reception National Office (02 6270 3406)
Once your nomination is received the venue and time of session will be confirmed with you. Nominations are due by Thursday 12 August 2010.
ITSA Information Sessions FAQs (Updated 1 September 2010)
Changes to Bankruptcy Notices effective from 11 August 2010
Minimum threshold for a Bankruptcy Notice and Creditor Petition will be $5,000 from 11 August (PDF)
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| Superannuation and Bankruptcy |
The Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007 (the Act) received Royal Assent on 15 April 2007.
The amendments allow bankruptcy trustees to recover superannuation contributions made prior to bankruptcy with the intention to defeat creditors. The rules for recovering superannuation are based closely on section 121 of the Bankruptcy Act 1966. These amendments have commenced and are applicable to contributions made on or after 28 July 2006.
The amendments will also allow an Official Receiver to issue a Notice to freeze a contributor's interest in a superannuation fund or a Notice pursuant to section 139ZQ to recover void contributions in the same way as other void transactions where the Official Receiver has reasonable grounds to believe the contributions are void. These amendments will commence on 16 October 2007.
| Debt Agreement Amendments |
The Bankruptcy Legislation Amendment (Debt Agreements) Act 2007 obtained Royal Assent on 10 April 2007. This Act amended the Bankruptcy Act 1966 to:
(a) provide for enhanced regulation of debt agreement administrators;
(b) specify the duties of a debt agreement administrator;
(c) encourage creditors to make voting decisions in respect on debt agreements based on the debtor’s capacity to pay;
(d) provide more effective means of dealing with default by the debtors subject to debt agreements; and
(e) simplify, streamline and clarify a range of provisions to improve the operation of the debt agreement regime.
| Strengthening Bankruptcy Act Anti-Avoidance Provisions |
The Bankruptcy Legislation Amendment (Anti-Avoidance) Act came into effect on 31 May 2006. This Act contains amendments designed to strengthen the ability of bankruptcy trustees to recover property transferred prior to bankruptcy. It also covers property acquired by a third party prior to bankruptcy using the bankrupt's resources and from which the bankruptcy has derived a benefit.
The Act and the Revised Explanatory Memorandum are now available.
Details of the amendments, how they will work in practice, and the transitional arrangements are also available.
| The Bankruptcy and Family Law Legislation Amendment Act 2005 |
This Act received Royal Assent on 18 March 2005. The principal purpose of these amendments is to harmonise the law relating to division of property under the Family Law Act 1975 and the law relating to bankruptcy under the Bankruptcy Act 1966. The relevant changes are outlined here. A copy of the amendment Act is also available.
The Act has also introduced a new supervised account regime to improve the ability of bankruptcy trustees to collect income contributions from bankrupts. Details of how this new regime works are available here.
The Act has also changed the treatment of binding financial agreements (made under the Family Law Act 1975) in the event of bankruptcy. These changes are outlined here and are designed to ensure that debtors cannot use financial agreement to defeat the claims of creditors.
Schedule 1 of the Act, dealing with the interaction between bankruptcy and family law, commences on 19 September 2005. A more detailed explanation of those changes is available here.
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Bankruptcy law and practice stands within the context of the general commercial, property and
lending legislative schemes of the Commonwealth and each state or territory.
Commonwealth legislation can be accessed via http://www.comlaw.gov.au.
State and territory legislation is available at http://www.austlii.edu.au.
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