Current at: 01 July 2010
Changes to bankruptcy laws
Federal Parliament has recently made some changes to the Bankruptcy Act.
Here, is a summary of the main changes and what they might mean for your business:
An increase in the bankruptcy threshold
An individual will now have to have incurred debts of more than $5,000 for creditors to file a petition against them or for them to be able to declare bankruptcy. This is an increase from the $ 2,000 which has been in place since 1996.
This will make it difficult to force a debtor into bankruptcy. However whilst the threat of bankruptcy can often be a useful tool in getting paid, there are arguments that once an individual becomes bankrupt, you are less likely to receive the monies owed to you. This is because other creditors will have a claim on the monies and trustee fees and costs are always the first to be paid out of the bankrupt’s estate.
Other options such as negotiated payment arrangements, civil debt recovery, garnisheeing income and seizing assets can be appropriate than bankruptcy for recovering small debts.
Increase in the time defaulters have to pay
There is also an increase in the time someone who has defaulted on a payment has to settle the debt before they can be declared bankrupt.
Creditors will have to wait 21 days to have a debtor declared bankrupt after the debtor has defaulted on a debt. At the moment, creditors can start bankruptcy proceedings seven days after a default on a debt.
If you are the one being pressed for payment this will give you a greater time to get your financial affairs in order and if possible, facilitate refinance arrangements.
There have been other consequential amendments as well, including increase powers for trustees and tightening the fees trustees are able to charge.
For more information on your debt recovery options please contact a HIA workplace adviser on 1300 650 620.
DISCLAIMER – the above is intended to provide general information in summary form. The contents do not constitute specific advice and should not be relied upon as such. Formal specific advice should be sought by members with respect to particular matters before taking action.