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Thursday, 26 November 2009
Page: 13216

Mr McCLELLAND (Attorney-General) (6:07 PM) —in reply—I thank the House for its indulgence in continuing at this time. I would certainly like to thank members for their contributions to the debate. The principal purpose of the amendments in the Bankruptcy Legislation Amendment Bill 2009 is to modernise the national personal insolvency scheme and make it more efficient. They strike a balance between the need for fairness and the need to ensure a strong economy. The bill contains reforms that will encourage debtors to obtain early advice and give debtors greater access to alternatives to bankruptcy by making debt agreements an option for more debtors. Last year, for instance, debt agreements provided an average return to creditors of around 60c in the dollar compared to less than 2c in the dollar in bankruptcy. In other words, there are benefits all round.

The increase in the minimum amount upon which a creditor can petition for bankruptcy to $10,000 will ensure that debtors are not bankrupted over a relatively small debt. As I mentioned when I introduced the bill, I believe that it is inappropriate to use bankruptcy to recover relatively small debts or to use it effectively as a debt collection device rather than as a last resort. In that respect, unquestionably, the increase in the minimum amount upon which a creditor can petition for bankruptcy to $10,000 has attracted the most attention from stakeholders and also the media. That has been the most controversial of all the reforms proposed in the bill. Critics of the increase in the minimum amount have argued that businesses, and in particular small businesses, will find it more difficult to collect smaller debts under that sum. This point was made, for instance, by the member for Farrer. I can only reiterate that the purpose of bankruptcy is as a last resort rather than a debt collection tool. As speakers have indicated, there are alternatives to seeking bankruptcy.

I should also point out that the increase in the minimum amount will not have a large or disproportionate impact on small businesses. For instance, in 2008-09 there were only 391 sequestration orders for an amount of less than $10,000. Given that there are approximately 1.93 million small businesses in Australia, it is likely that only a tiny proportion of small businesses would have filed a creditor’s petition for an amount of less than $10,000 in any given year. The measures in this bill will encourage more people to consider other options, such as debt agreements. As I have indicated, these most certainly can be a constructive alternative to bankruptcy.

The reforms contained in the bill related to trustee remuneration will reinforce the principle that creditors should have oversight of a trustee’s administration of a bankrupt’s estate. The requirement to lodge a statement of affairs also protects the interests of creditors. In particular, it prevents the debtor from dissipating funds and assets potentially available to pay creditors. This requirement is strengthened by this bill by increasing the penalty for failure to lodge a statement of affairs and providing the official receiver with a specific power to compel a bankrupt to provide such a statement of affairs. The bill also contains reforms in relation to offences. These amendments will help ensure that any criminal, dishonest or other inappropriate conduct by bankrupts is dealt with appropriately.

The bill highlights the government’s commitment to modernising the personal insolvency system and to ensuring that our personal insolvency system treats both debtors and creditors fairly. Given the tough economic times that we are currently experiencing and the fact that in the last financial year Australia recorded a record level of personal insolvency, it is evident that the reforms contained in this bill are necessary. The reforms strike an appropriate balance by giving additional grace to debtors in some respects but also imposing stronger obligations of good faith in other respects. Importantly, the reforms will encourage those facing financial difficulty to obtain early advice with a view to negotiating an appropriate resolution of their circumstances with creditors which can be in the interests of both parties. I commend this bill to the House.

Question agreed to.

Bill read a second time.