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Overhaul of debt agreements under the Bankruptcy Act.



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ATTORNEY-GENERAL THE HON PHILIP RUDDOCK MP

NEWS RELEASE

Parliament House, Canberra ACT 2600  Telephone (02) 6277 7300  Fax (02) 6273 4102 www.law.gov.au/ag

27 July 2006 139/2006

OVERHAUL OF DEBT AGREEMENTS UNDER THE BANKRUPTCY ACT

Changes to debts agreements to ensure better outcomes for creditors and debtors will be outlined today by Attorney-General Philip Ruddock.

The changes under the Bankruptcy Act will ensure equitable treatment of creditors and will address concerns raised over the fees and regulation of administrators.

The changes follow a comprehensive review of the debt agreement system conducted by the Insolvency and Trustee Service Australia (ITSA) and the Attorney-General’s Department.

Debt agreements were introduced by the Government in 1996 as a relatively low cost, flexible and informal alternative to bankruptcy. While they attract general support, business had seen the need for reforms.

There have also been concerns about the attitudes of some creditors who expect high rates of return without considering an individual debtor’s capacity to pay.

The changes include: • licensing of debt agreement administrators; • regulation of fees payable to debt agreement administrators; • ensuring creditors are treated equally; and • streamlined procedures for dealing with default.

“These reforms will boost confidence in the system and protect vulnerable debtors by ensuring that debt agreements are used only where the debtor can make an affordable offer to creditors,” Mr Ruddock said.

“With clearly stated responsibilities, we will ensure we have highly capable and professional administrators to assist debtors with unmanageable debt. Debt agreement administrators who propose agreements based on the debtor and creditors’ best interests need not be concerned by the changes.

“Debt agreements are an important feature of Australia’s personal insolvency system as they give debtors an opportunity to make formal arrangements to pay creditors without resorting to bankruptcy,” Mr Ruddock said.

Media Contact: Michael Pelly 0419 278 715

Mr Ruddock will be opening the Sixth Insolvency and Trustee Service Australia (ITSA) Bankruptcy Congress in Brisbane at the Sofitel Hotel at 9am. A copy of the review report and further details of the reforms can be found on ITSA’s website ( www.itsa.gov.au ).