A new bill has been introduced into Federal Parliament which relevantly seeks to reduce the period of automatic discharge from bankruptcy from three years to one.
Reducing the time for discharge is a deregulatory move and correlates with the anti-red tape position of the current government.
A bankrupt will be automatically discharged one year after the filing their statement of affairs;
The legislation will apply retrospectively to bankruptcies on foot which will be discharged one year after the filing of the statement of affairs, subject to any objections made by the trustee;
Bankruptcies extended from five to eight years will remain unchanged;
Bankrupts are required to notify the trustee within 10 business days of any changes to their personal details (this used to be an ‘immediate’ requirement);
The contribution assessment period for income earners is still three years as the contribution assessment remains in force two years after discharge; and
Bankrupts are still required to retain records throughout the three-year contribution period.
A higher number of voluntary bankruptcies will be sought by those struggling with debt;
Restrictions that prevent bankrupts that run small businesses from retrying are reduced;
Trustees will still be able to extend the period of bankruptcy for misconduct;
Current bankruptcies that are over a year old will be discharged, subject to trustee objections;
Income contributions will continue for the usual three-year period.
Practitioners should be aware of the new limitations on discharged bankrupts, particularly when dealing with income contribution. Individuals, particularly those that run small businesses, should be aware that applying for bankruptcy is being destigmatised and recovering from bankruptcy is made significantly less burdensome by the new proposed law.