Government seeks to reform bankruptcy laws

The time allowed for a debtor to respond to a bankruptcy notice could be raised under reforms being considered by the federal government.

Attorney-General Mark Dreyfus is seeking to overhaul the Bankruptcy Act, releasing a discussion paper outlining a number of proposals.

Two possible changes include increasing the bankruptcy threshold value from $10,000 to $20,000 and extending the period for a debtor to respond to a bankruptcy notice from 21 to 28 days.

The threshold value was temporarily lifted to $20,000 as a safety net during the pandemic, but the measure ended in December 2020.

However, the government has been advised locking in the $20,000 threshold will address concerns about the use of bankruptcy proceedings to pursue small debts, without reducing the general availability of credit in the economy.

As well, Mr Dreyfus' department has flagged a reduction in the period of time for which a discharged bankrupt is recorded on the National Personal Insolvency Index.

And the laws could be amended so an "act of bankruptcy" is not taken to have occurred where a debtor submits a debt agreement proposal to the Official Receiver, or where a debt agreement proposal is accepted by creditors.

"The Australian government is committed to an effective bankruptcy system that serves debtors while also protecting the rights of creditors," Mr Dreyfus said.

Submissions on the personal insolvency discussion paper close on September 29.

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