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Thursday, 24 June 2010
Page: 4245

Senator BRANDIS (10:09 AM) —The Bankruptcy Legislation Amendment Bill 2009 is to streamline the process for fixing and reviewing trustee remuneration in a bankruptcy, strengthen the penalties for offences, abolish bankruptcy districts, increase the minimum debt for a creditor’s petition, increase the stay period following a declaration with intention to file a debtor’s petition and increase the debt income and assets test thresholds for debt agreements.

The bill is intended to streamline and update the regime to reflect the change in the value of money since the last significant revisions in 1996. The most important of these is to increase the minimum amount for which a creditor may petition. In addition, the threshold amount for debt agreements—that is, a voluntary agreement between a debtor and creditors principally available to debtors with low levels of income, assets and debts—has been increased by 20 per cent. The threshold is calculated by reference to the pension rate multiplied by a fixed amount. The multiplier is to be raised from seven to 8.4. A proposal in the exposure draft to significantly reduce the bankruptcy periods was removed following stakeholder protests. The amendments in relation to offences and bankruptcy districts, which are outmoded, are unlikely to be controversial. However, stakeholders have complained that consultation was inadequate in relation to other amendments. The raising of the creditors’ petition threshold will excise a substantial proportion of consumer debt from the bankruptcy regime. Some insolvency practitioners, particularly those with significant practice in arranging debt agreements, have complained that lifting the bankruptcy threshold will reduce the utility of the debt agreement regime notwithstanding the relatively modest increase in the debt agreement limit.

The bill was referred to the Senate Legal and Constitutional Affairs Legislation Committee, which reported on 23 February. The Liberal members of the committee recommended that the original proposal in the draft bill to lift the threshold from $2,000 to $10,000 be changed by lifting the threshold only to $5,000. The threshold of $2,000 set in 1996 would be worth $2,770 in today’s money. The arguments in favour of a fivefold increase have clearly not been substantiated. As a compromise, an increase to $5,000, which the government amendments secure, is more balanced and more broadly in line with indexation. There was evidence before the committee that the stay period of 28 days was too long. A 21-day stay period would grant debtors sufficient time to consult with financial advisers and reorganise their affairs without unduly prejudicing the rights and interests of creditors. The government has also conceded that point raised by Liberal senators on the committee.

Finally, any increase in the eligibility threshold for debt agreements would not be justified until the findings of previous impending reviews of the regime have been taken into account. A review is due to be undertaken in mid- to late-2010 and the proposed amendments in relation to that matter are premature. I welcome the fact that the government has also yielded to the views of the Liberal senators on the Senate committee that these amendments should be deferred pending the completion of those reviews. In the circumstances, and with the three amendments—that is, lowering the increase in the threshold from $10,000 to $5,000, shortening the stay period from 28 days to 21 days and deferring consideration of the debt agreements provisions until the completion of the reviews I have mentioned—the coalition supports the bill.