The Bankruptcy Regulations 1996 (the existing Regulations) manages the procedural and administrative aspects of the Bankruptcy Act 1966 (the Act). The Act regulates Australia’s personal insolvency system and provides a framework for people to manage or discharge their debts whilst allowing assets to be distributed to affected creditors.

The Regulations are essential in effectively administering bankruptcies, debt agreements and other formal insolvency options governed by the Act; however, the existing Regulations are set to be renewed on 1 April 2021. The Attorney-General’s Department has released an Exposure Draft for the Bankruptcy Regulations 2021 (the new Regulations), seeking stakeholder views and responses to effectively update and modernise the 1996 Regulations.

Chamberlains’ Managing Director and leading insolvency, restructuring and litigation lawyer, Mr Stipe Vuleta, considers and proposes a response to the Exposure Draft of the new Regulations.

Minor and Technical Amendments

1. We agree with the commentary by the Attorney-General’s Department that there are several minor and technical amendments in the Proposed Regulations which are implemented for otherwise practical or innocuous reasons are broadly not contentious, and no submissions are specifically made. The move away from calendar days to business days in our view creates less certainty rather than more and creates challenges where debtor and Trustee may be located in differing jurisdictions.

2. The move to the list identifier ‘Section’ as opposed to ‘Regulation’ is supported in that it simplified and modernises the language of the Proposed Regulations.

Substantive or Clarifying Amendments

In considering the more substantive or other clarifying amendments proposed in the Proposed Regulations, we have considered each major item and any specific questions raised in the Discussion Paper in order of appearance and then considered any other matters which require submissions.

New Definition of Preliminary Remuneration and Expenses

3. From a practical perspective though section 50 orders pursuant to the Bankruptcy Act 1966 (Cth) (Act) are not common, they are common enough to warrant the need for clarification in the Proposed Regulations of practical issues which might arise in the course of their implementations by Trustee.

  • Question 1: Is a definition needed in the new Regulations? Simply put, no definition is required as it serves only to partially clarify a matter which is for practical reasons dealt with commonly by Court orders.
  • Question 2: Does the definition provide adequate guidance? It does; however it may otherwise be unnecessary but for its clarificatory nature, particularly given it is not linked to the direct drafting to section 50 of the Act but rather a procedural outcome arising from it.

Exchange Rates

4. Changes to Exchange Rate provisions are uncontroversial.

Proof of Debts and Foreign Currency

5. This is a helpful and uncontroversial change.

Modernised List of Household Property

6. The new modernised list of household goods is practically irrelevant and does not provide meaningful guidance to Trustees, any more than the existing (now significantly outdated) list does. A more practical approach would be to rely solely on the proposed sections 27(1)(c) and 27(4) of the Proposed Regulations and remove any list (whether expanded or otherwise).

Transfers exempt from Being Void Against a Trustee

7. The points raised in the Discussion Paper are all relatively practically effective and conform with current practice and views.

  • Question 3: Section 31 of the Proposed Regulations is not necessary (and should not be included in the final version) particularly in light of section 19 of the Act.
  • Question 4: There are less undesirably consequences arising out of the omission of the Section 31 clarification as it broadens Trustee discretion rather then constricts it, making the Proposed Regulations more flexibly (and consequently more relevant) for a longer period of time into the future (and accordingly requiring less amendment from time to time).

Income of a Dependant

8. The move to annual indexations is a welcome change. It minimises administrative costs and complexities for estates however indexation should occur at the time the income is incurred rather than at the time of assessment as it creates and economic rent for circumstances where debtors are slow to attend to this process (whether with good reason or without).

Timing for Filing a Consent to Act Instrument

9. Question 5: We have some concerns about the timing of this process being moved to be concurrent with or prior to formal appointment as it creates additional expense for practitioners in matters where a matter may resolve post-filing of a CTA but prior to sequestration. It is preferred that any administrative burden be handled by the OR rather than transferred to private Trustees.

Amended Timeframe for Notification of Termination of a Personal Insolvency Agreement

10. Question 6: Yes, two days is a reasonable time frame for notification.

11. Question 7: Other than the use of business days and any matters specifically mentioned in this submission the Proposed Regulations attend to clarifying most timeframes appropriately, particularly noting, they are not a substantive shift away from the existing regulations.

Information to be Entered in the NPII

12. Question 8: The proposed tables are a welcome change to the existing Schedule 8.

Changes to Bankruptcy Notice Form

13. Question 9: We agree with the proposed change to use the word ‘accompanying’ as a more accurate and technology agnostic verb.

14. Question 10: We otherwise do not submit that any further changes to the Bankruptcy Notice form are required in the foreseeable future.

Changes to Calculation of FBT for Motor Vehicles

15. The proposed changes are appropriate and effectively harmonise the Proposed Regulations with existing Federal Legislation.

Clarification of Certain Offences and their application to the IG, OT or OR

16. This is a practical and necessary suite of amendments which ensures AFSA instrumentalities are not overburdened with internal disputes and conflict.

Monetary Figures Subject to Indexation

17. Updating baselines for indexation is uncontroversial and consistent with the drafting of the existing Regulations.

 

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