New legislation petitioning for bankruptcy threshold to be raised

Wednesday August 26, 2009

The federal government legislation is attempting to have the bankruptcy threshold lifted in a bid to protect younger Australians from suffering from outstanding consumer debt, preventing the successful application of loans from banks.

As it stands now, a person can be declared a bankrupt if they have a debt of only $2,000 with the Labor government wishing to raise this amount to $10,000 in an attempt to update modernise personal insolvency arrangements. The action is predicted to benefit people with relatively few assets and little income from being branded with bankruptcy status, thereby almost ruining any banks application and loans.

Bankruptcy Statistics for Jan 09-Mar 09:

• 6340 non-business bankruptcies in Australia
• 824 business-related financial crashes
• 2492 personal insolvencies in NSW
• 250 business cases in NSW

Attorney-General Robert McClelland stated that over the last financial year 20 per cent of sequestration orders were the results of people with debts between $2,000 and $10,000.

Other proposed changes include increasing the time period between application for a bankruptcy petition and the start of action to recover debts from seven days to 28 days in order to give the debtors more time to seek alternative repayment programs.

Additionally, adjusting all thresholds pertaining to income, asset and debt so more people have an opportunity to enter voluntary debt agreements with creditors.
Mr McClelland plans are aiming to assist "people who have simply fallen on hard times" while also penalising those businesses and individuals seeking to profit from the current financial downturn.

"In the case of young people, that can often prevent them from obtaining a loan for a car let alone a house." Mr McClelland said.

Of course, the associated prison term has also increased from three years to five years in a bid to prevent bankruptcy fraud.

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