The Bill is the latest chapter in a series of reforms that were initially announced on 7 December 2015 as part of the government’s National Innovation and Science Agenda, which has resulted in major changes to both corporate and personal insolvency.
Apart from reducing the bankruptcy period from three years to one year, the Bill also seeks to:
- Introduce a corresponding reduction in the period during which the bankrupt is required to disclose bankrupt status when applying for credit, seek permission to travel overseas and when applying for certain licences or entering certain professions;
- Maintain the income contribution obligations for a minimum period of three years. That is, while the bankruptcy period will end after one year in most cases (i.e. the bankrupt will be discharged after one year), the bankrupt’s obligations to pay income contributions will remain for two years after the date of discharge, unless this period is extended due to non-compliance. Bankrupts are obliged to pay income contributions where their income exceeds the prescribed threshold (being $55,446.30 per annum for bankrupts without any dependants, as at the date of this article);
- Introduce an obligation by the bankrupt to notify the trustee of any changes in contact details (name, address or phone number) within 10 business days. This obligation applies during any period in which the bankrupt is liable to pay income contributions, which in most cases would be three years, and a breach of this obligation carries a penalty of imprisonment for up to 6 months;
- Maintain the ability of a trustee to determine that a supervised account regime applies to a bankrupt, which requires the bankrupt to open a bank account in which all of the bankrupt’s income is deposited and withdrawals can only be made with the trustee’s permission. While this is not a new requirement, the Bill will allow the trustee to exercise this option during any period after discharge so long as the bankrupt is still liable to pay income contributions;
- Maintain the obligation to keep and produce books that record income derived by the bankrupt. This obligation extends to any period after discharge so long as the bankrupt is still liable to pay income contributions.
The Bill aims to encourage entrepreneurs to “bounce back” quicker and contribute to economic growth, while still allowing creditors to benefit from any income generated by the bankrupt after they are discharged so long as the income exceeds the prescribed threshold.
The amendments, if accepted by the Parliament, will take effect six months after Royal Assent.
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