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OVERVIEW: ONE YEAR BANKRUPTCY

Fact Sheet

by Clare Corrigan18.09.19

You  have  probably  heard  about  the  approaching  changes  to  reduce  the  three  year bankruptcy period to one year. While we do not know the exact date the changes are to be implemented, one thing for sure is that there are a lot of varying opinions surrounding the shorter term. Regardless of whether the shorter bankruptcy term is thought to be a positive change or not, we believe that the one year bankruptcy period will encourage more individuals to consider bankruptcy as an option to help relieve them of their insurmountable debts. Below is an overview of the Bankruptcy Amendment (Enterprise Incentive) Bill 2017 (“the Bill”) for individuals who are looking to enter into bankruptcy or who are currently bankrupt, and what the changes will mean for them.

Individuals will be discharged from bankruptcy one year after they file their Statement of Affairs. It also means that other periods associated with bankruptcy are reduced to one year, including:

  • Disclosing  their  bankruptcy  status when applying for credit; 
  • Seeking permission for overseas travel
  • Obtaining certain licences;
  • Entry  into  certain  professions  and membership bodies; and
  • Ability to purchase asset

The  Bill  also  implements  other  changes  which should be considered: The  period  for  payment  of  income  liability remains  unchanged.  This  means  individuals  will still  have  their income  assessed  for  a  total  of three years, two of which will be after they have been discharged from bankruptcy.

  • The  period  for  payment  of  income  liability remains unchanged. This means individuals will still  have  their  income  assessed  for  a  total  of three years, two of which will be after they have been discharged from bankruptcy.
  • The lodgement of an objection to an individual’s discharge remains in place, meaning those who do not comply with directions of the trustee, or who fail to meet their obligations, may see their discharge date being extended. 
  • Individuals who are discharged from bankruptcy will still be required to assist in the Trustee even after discharge

Anyone who is considering going into bankruptcy at  this  point  in  time,  could  be  made  aware  of the  changes  that  are  coming,  which  have  been outlined above. They should be assured that the Bill will apply to undischarged bankrupts, thereby effectively  reducing  their  bankruptcy  term  also to one year.

In other words, if an individual is bankrupt under the  three  year  term  period,  they  will  have  the benefit of the one year bankruptcy when the Bill has been implemented.

Anyone who is considering going into bankruptcy at this point in time, could be made aware of the changes that are coming, which have been outlined above. They should be assured that the Bill will apply to undischarged bankrupts, thereby effectively reducing their bankruptcy term also to one year.

In other words, if an individual is bankrupt under the three year term period, they will have the benefit of the one year bankruptcy when the Bill has been implemented.

I believe the changes brought by the Bill will mean that individuals with unmanageable debt will have less reasons to be concerned about the choice and impact of bankruptcy on their lives because of the reduced bankruptcy term. On the other hand, some believe the one year period is not long enough, and the shorter term may see individuals follow the  same  path  which  lead  them into  financial difficulty, resulting  in  a  damaging  cycle. However, at this point in time it is purely speculative, and only time will tell whether this is accurate. Overall, I believe the one year bankruptcy term will provide individuals a better chance to move on from the circumstances that ave rise to their financial difficulties, which usually has a positive effect on them personally and all other aspects of their lives.