Bills Digest no. 88, 2017–18
PDF version [462KB]
Liz Wakerly, Economics Section
Paula Pyburne, Law and Bills Digest Section
19 March 2018
Contents
The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Personal insolvency
Operation of the Bankruptcy Act
Declaration of intention
Bankruptcy
Personal insolvency agreement
Debt agreements
Concerns with the debt agreement
framework
Committee consideration
Senate Legal and Constitutional
Affairs Committee
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Treasury consultation
ASIC report
Committee inquiry
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Schedule 1–Debt agreement proposals
Part 1–Persons who may be authorised
to deal with debtor’s property
Commencement and application
Part 2—Reimbursement of expenses
Commencement and application
Part 3—Value of debtor’s property
Commencement and application
Part 4—Payment to income ratio
Commencement and application
Part 5—Undue hardship to debtor
Commencement and application
Part 6—Other matters
Schedule 2—Debt agreements
Part 1—Length of debt agreements
Commencement and application
Part 2—Proposals to vary debt
agreements
Key issue—Sustainability
Key issue—Conflicts of interest
Key issue—Valuable consideration
Commencement and application
Part 3—Proposals to terminate debt
agreements
Commencement and application
Part 4—Court orders to terminate debt
agreements
Part 5—Voiding debt agreements
Commencement and application
Part 6—Debt agreement administrators
to refer evidence of offences
Commencement and application
Part 7—Reporting requirements for
debtors in arrears
Commencement and application
Part 8—Alignment of offences
Separate bank accounts
Sufficient records
Commencement and application
Part 9—Time for submitting annual
returns
Commencement and application
Schedule 3—Registered debt agreement
administrators
Part 1—Applications for registration
Insurance
Interview
Evidence
Registration renewal
Commencement and application
Part 2—Conditions of registration
Commencement and application.
Part 3—Ongoing obligation to maintain
insurance
Commencement and application
Part 4—Cancellation of registration
Commencement and application
Part 5—Trust accounts
Commencement and application
Part 6—Functions of Inspector-General
Commencement and application
Other provisions
Schedule 4—Registered trustees
Commencement and application
Schedule 5—Unclaimed money
Application and saving provisions
Appendix 1: Personal insolvencies,
Australia
Figure 1: Personal insolvencies,
Australia 1986–87 to 2016–17
Appendix 2: Formal options for
insolvency
Date introduced: 19 February 2018
House: House of Representatives
Portfolio: Attorney-General
Commencement: Various dates as set out in the body of this Bills Digest.
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.
When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at March 2018.
The Bills Digest at a glance
Purpose of the Bill
The Bill amends the Bankruptcy Act 1966
to effect a comprehensive reform of Australia’s debt agreement system in the
following manner:
- Schedule
1 – Debt agreement proposals modifies the requirements for and treatment
of, debt agreement proposals
- Schedule
2 – Debt agreements sets standards for the operation of debt agreements
- Schedule
3 – Registered debt agreement administrators modifies the standards that
registered administrators must satisfy
- Schedule
4 – Registered trustees contains technical amendments and
- Schedule
5 – Unclaimed money modifies the requirements for registered personal
insolvency practitioners to pay unclaimed moneys to the Commonwealth.
Background
Debt agreements were introduced in 1996 as a form of
insolvency administration outside bankruptcy for persons with low levels of
debt, few assets and low incomes. In 2016–17, debt agreements accounted for
more than 45 per cent of all personal insolvencies. Commentators have expressed
concerns that debt agreements may be causing harm, particularly to those vulnerable
debtors on low incomes for whom they were originally intended. Key concerns
relate to the use of inappropriate sales techniques by debt agreement
administrators, inadequate understanding by firms of the relevant law and risks
of particular strategies, opaque and often high administrator fees and costs, and
inflexible repayment plans.
Key issues and provisions
The Bill:
- sets
stricter practice standards for debt agreement administrators (including
compulsory registration), tougher penalties for wrongdoing and grants the
Inspector-General additional investigative powers to address misconduct
- requires
debt agreement administrators to: hold and maintain professional indemnity and
fidelity insurance as a requirement of registration; and to be fit and proper
persons
- clarifies
the types of expenses that debt agreement administrators can recover
- links
debt agreement repayments to a specified percentage of income, with the
percentage determined by legislative instrument
- limits
the length of a debt agreement proposal to three years (in line with bankruptcy
provisions)
- doubles
the current asset eligibility threshold to be eligible to propose a debt
agreement
- provides
the Official Receiver with the ability to reject proposed debt agreements that
would cause undue financial hardship to the debtor
- reduces
the potential for conflicts of interest in the proposal, variation and
termination of debt agreements, and aligning offences with those applicable to
bankruptcy trustees and
- extends
the possibility of voiding a debt agreement to the situation where a debt
agreement administrator has breached conditions or duties.
Purpose of
the Bill
The purpose of the Bankruptcy Amendment (Debt Agreement
Reform) Bill 2018 (the Bill) is to amend the Bankruptcy Act 1966
(the Bankruptcy Act) to effect a comprehensive reform of Australia’s
debt agreement system. Significant measures in the Bill make provision for:
- the
types of practitioners authorised to be debt agreement administrators
- registration,
deregistration and obligations of debt agreement administrators
- formation,
administration, variation and termination of debt agreements
- protections
against debt agreements that cause financial hardship or have other defects and
- powers
of the Inspector-General in Bankruptcy (the Inspector-General) with respect to
debt agreements and debt agreement administrators.
Structure
of the Bill
The Bill comprises five Schedules:
- Schedule
1 – Debt agreement proposals modifies the requirements for and treatment
of, debt agreement proposals. Amendments include:
- limiting
the types of practitioners authorised to be debt management agreement
administrators
- the
types of information the debtor must record in a debt agreement proposal
- the
certifications the proposed administrator must make
- the
standards for how the Official Receiver must handle proposals
- Schedule
2 – Debt agreements sets standards for the operation of debt agreements
covering:
- the
length of debt agreements
- mechanisms
for varying, terminating and voiding debt agreements
- an
administrator’s duties in the administration of debt agreements
- Schedule
3 – Registered debt agreement administrators modifies the standards that
registered debt agreement administrators must satisfy, including:
-
prerequisites
and conditions for registration
- ongoing
obligations
- grounds
for deregistration
- trust
accounts
- functions
of the Inspector-General
- Schedule
4 – Registered trustees contains technical amendments
- Schedule
5 – Unclaimed money modifies the requirements for registered personal
insolvency practitioners to pay unclaimed moneys to the Commonwealth, and the
process to apply for unclaimed moneys.
Background
Personal
insolvency
The Australian
Financial Security Authority (AFSA), which is an executive agency in the
Attorney-General’s portfolio, manages the application of bankruptcy and
personal property securities law through the delivery of personal insolvency
and trustee, regulation and enforcement and personal property securities
services.[1]
Under the Bankruptcy Act, there are four options
for individuals facing unmanageable debt:
- a
declaration of intention (DOI) to present a debtor’s petition which provides
temporary relief while being pursued by creditors (Division 2A in Part IV of
the Bankruptcy Act)
- bankruptcy
which includes a debtor’s petition (voluntary bankruptcy) (Division 3 in Part
IV of the Bankruptcy Act) and a creditor’s petition (Division 2 in Part
IV of the Bankruptcy Act)
- personal
insolvency agreements (Part X of the Bankruptcy Act) and
- debt
agreements (Part IX of the Bankruptcy Act).[2]
Appendix 1 to this Bills Digest contains a chart
illustrating the number of new administrations of personal bankruptcies, debt
agreements and personal insolvency agreements in Australia for the period 1986–87
to 2016–17. Debt agreements have become increasingly popular: in 2016–17, debt
agreements accounted for more than 45 per cent of all personal insolvencies, up
from less than two per cent in 1997–98.
The AFSA website provides comparison
tables for the three agreement options, looking at eligibility, income
payments, restrictions on employment, the treatment of assets and the nature of
debts, personal restrictions, and fees and charges. These tables are shown in Appendix
2 to this Bills Digest.[3]
Operation
of the Bankruptcy Act
Declaration
of intention
A DOI provides a 21-day protection period where unsecured
creditors cannot take further action to recover debts.[4]
Details of the DOI do not appear on the National Personal Insolvency Index
(NPII). A DOI does not automatically make a debtor bankrupt, but creditors can
use the fact that a DOI has been lodged to apply to the court to make a debtor
bankrupt.[5]
Bankruptcy
Bankruptcy brings a definite end to debt problems, with
creditors dealing exclusively with the bankruptcy trustee.[6]
A bankrupt must provide details of debts, income and assets to the trustee who
can sell certain assets to help pay debts. If a bankrupt’s income exceeds a set
amount, the bankrupt may need to make compulsory payments to the trustee. A
bankruptcy may impose restrictions on employment and overseas travel, may
affect a bankrupt’s ability to obtain future credit and appears permanently on
the NPII.[7]
Currently, a bankrupt will automatically be discharged
from bankruptcy if three years and one day have passed since a statement of
affairs was filed.[8]
Personal
insolvency agreement
A personal insolvency agreement (PIA), also known as a
Part X, is a legally binding agreement between a debtor and his or her
creditors. The PIA involves the appointment of a trustee to take control of
property and make an offer to creditors. The offer may be to pay all or part of
debts by instalments or a lump sum. There are no debt, asset or income limits
to be eligible for a PIA and the length of the PIA will depend upon
negotiations with the trustee and creditors. Fees apply to propose, lodge and
manage a PIA.[9]
A PIA is an act of bankruptcy with debtor details
appearing on the NPII permanently. Debtor details will appear on a credit file
for up to five years (or longer) and consent of the controlling trustee is
required before dealing with property. Under a PIA, a debtor cannot manage a
corporation until the terms of the agreement have been finalised.
Debt
agreements
A debt agreement is a legally ‘binding agreement between
an insolvent debtor and his or her creditors under which the creditors agree to
accept a sum of money the debtor can afford to pay’.[10]
Debt agreements were introduced into Australian law in 1996, and were intended
to offer a more flexible, less onerous and socially stigmatising alternative to
bankruptcy.[11]
A debt agreement begins with a proposal, put by the debtor
to his or her creditors. This proposal must satisfy specific conditions set out
in Part IX of the Bankruptcy Act, and must be lodged with AFSA
using prescribed forms.[12]
To be eligible to propose a debt agreement, unsecured debts and assets must be
less than $111,675.20, and annual after-tax income must be less than
$83,756.40.[13]
A debt agreement requires a debtor to negotiate a
percentage of the combined debt that can be repaid over a period of time
(usually between three and five years); repayments are made to a debt agreement
administrator; and once payments are complete and the agreement ends, creditors
cannot recover any outstanding monies owed.[14]
Debt agreements are subject to the oversight of the
Official Receiver, AFSA. If the Official Receiver is satisfied that the debt
agreement proposal is in accordance with regulatory requirements and
eligibility criteria have been met, the proposal is distributed to creditors.
The proposal becomes a binding agreement if enough creditors vote to accept it.[15]
Fees are charged for lodging a debt agreement proposal with
AFSA and for proposing and managing a debt agreement.[16]
Debt agreements cover most unsecured debts, or a debt not tied to specific
property.[17]
Proposing a debt agreement is an act of bankruptcy. The
key difference between bankruptcy and a debt agreement is that a debtor with
significant assets will lose those assets under bankruptcy but can retain them
with a debt agreement.[18]
The amount of time a debt agreement appears on the NPII
varies with the type of agreement and how it ends (ranging from one year to
five years from the date the debt agreement was made or the date the
obligations are complete, whichever is longer).[19]
If a debtor is unable to make payments as agreed, he or
she may seek to vary the terms of the debt agreement by lodging a proposal with
the Official Receiver.[20]
Any variation is subject to the consent of a majority of creditors. Debt
agreements may be terminated if the debtor defaults on payments for six months
or more, or becomes bankrupt; by an order of the Court; or where a proposal to
terminate the agreement is accepted by a majority in value of creditors.[21]
Concerns
with the debt agreement framework
Commentators have expressed concern that debt agreements
may be causing harm, particularly to vulnerable debtors on low incomes.[22]
There is no uniform regulatory framework applying to the
activities of debt management firms in Australia. Firms are not required to
hold a credit licence or an Australian Financial Services Licence to provide
debt management services.[23]
Not all debt agreement administrators are registered. A
debt agreement administrator is only required to be formally registered if: the
debt agreement administrator intends to lodge new debt agreement proposals
after 1 July 2007; and if the debt agreement administrator is already
administering more than five active agreements.[24]
Inspector-General
Practice Statement 2 outlines the requirements on a debt agreement
administrator to become registered.[25]
Currently, this includes passing a basic eligibility test and an examination of
their capability to perform the duties. As at 30 June 2017, there were 78
registered debt agreement administrators.[26]
Critics argue that some debt agreement administrators fail
to inform debtors of the full implications of signing a debt agreement,
maintaining that many debtors would be better off attempting to negotiate
repayment arrangements or debt waivers through financial hardship schemes or
external dispute resolution.[27]
For many low-income debtors, debt agreements prolong financial hardship;
bankruptcy would offer immediate relief.
The Inspector-General in Bankruptcy, AFSA’s Chief
Executive, has powers to regulate bankruptcy trustees and debt agreement
administrators (registered and unregistered), review decisions of trustees and
investigate allegations of offences under the Bankruptcy Act.[28]
Eight registered debt agreement administrators were inspected in 2016–17, along
with 49 of their administrations. Sixteen errors were identified, of which
seven concerned ‘failure to comply with certification duties’.[29]
It has been argued that some administrators encourage
low-income debtors to enter into agreements that are unsustainable.[30]
In 2015, a group of researchers at the Melbourne Law School undertook a national
online survey of financial counsellors, consumer solicitors and other
advocates who specialise in helping financially distressed individuals.[31]
The survey found that many of these advocates were ‘highly sceptical about the
value of debt agreements’. In particular, several advocates reported that debt
agreements often require clients to make regular repayments that they cannot
afford resulting in ‘continual hardship’. Some debt agreement administrators
were found to adopt inappropriate sales techniques, including failing to
disclose all relevant information to potential clients.[32]
When the debt agreement framework was established, it was
not expected that private, profit-making institutions would assume a prominent
role. In particular, it was ‘not proposed that there would be any fees or
administrative charges associated with debt agreements’.[33]
Critics of the current system maintain that high administrator fees result in
lower returns for creditors. In its online survey, Melbourne Law School
researchers reported criticism of the high administrative costs built into debt
agreements (in some cases greater than the original debt) and the inflexibility
of the repayment plans.[34]
Committee
consideration
Senate
Legal and Constitutional Affairs Committee
The Bill has been referred to the Senate Legal and
Constitutional Affairs Legislation Committee (the Committee) for inquiry and
report by 19 March 2018. Details of the inquiry are available here.
The Bill was referred to provide relevant stakeholders with the opportunity to
provide feedback and to allow for consideration of expert views on potential
impacts.
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing this Bills Digest, the Senate
Standing Committee for the Scrutiny of Bills had not commented on the Bill.
Policy
position of non-government parties/independents
Speaking in relation to the Bill, the Shadow
Attorney-General, Mark Dreyfus, stated that the Australian Labor Party would support
the Bill, ‘subject to any necessary amendments arising as recommendations from
the ongoing Senate inquiry’—in particular with reference to the three-year time
limit for debt agreement repayments.[35]
Mr Dreyfus expressed concern that the percentage cap on a debtor’s after-tax
income that can be repaid in the repayment schedule is subject to Ministerial
discretion, preferring this percentage be given a statutory footing.[36]
Position of
major interest groups
Treasury
consultation
The improvement of the bankruptcy and insolvency regimes
is part of the Government’s National
Innovation and Science Agenda which was announced by the Prime Minister, Mr
Turnbull on 7 December 2015.[37]
In conjunction with that announcement, Treasury circulated a consultation paper
entitled National
Innovation and Science Agenda – Improving bankruptcy and insolvency laws, and
sought public comment about ways in which to improve the relevant laws. In
their submissions to the Treasury, Financial Counselling Australia (FCA), the
Financial Rights Legal Centre and the Consumer Action Law Centre all advocated
for a full review of debt agreements.[38]
The Financial Rights Legal Centre argued that consumers are frequently misled
about the nature and consequences of debt agreements: ‘advantages are
consistently oversold and the disadvantages downplayed’.[39]
Common misperceptions about debt agreements include:
- it
is a debt consolidation rather than an insolvency option
- there
will be no effect on the ability to obtain credit
- there
will be no effect on the debtor’s trade licence or ability to continue in their
profession
- there
are no other options available to deal with financial difficulty and
- payments
made up from for the preparation of the debt agreement will ultimately be set
off against the debts (the payment is for the preparation of the debt agreement
and is not set off against anything. It is rarely refunded if the debt
agreement is rejected and many clients put themselves into default on their
credit obligations in order to make these payments).[40]
The Financial Rights Legal Centre recommended:
- debt
agreements be limited to potential debtors with a material divisible asset to
protect
- advertising
is not misleading and makes it clear that debt agreements are an act of
insolvency under the Bankruptcy Act, and
- AFSA
publish more comprehensive statistics on debt agreements.[41]
The Consumer Action Law Centre also proposed a minimum
standard of entry for debt agreements, including an income above the income
threshold in the Bankruptcy Act, and an asset that could be
seized under bankruptcy.[42]
ASIC report
In a 2016 report, the Australian Securities and
Investments Commission (ASIC) presented the findings of research into debt
management firms in Australia.[43]
Using both qualitative and quantitative techniques, the report presents some
key findings:
- a
growing number of debt management firms offer a wide range of services to
consumers including representing consumers at external dispute resolution (EDR)
- fees
and costs were opaque, often high and heavily ‘front loaded’
- some
sales techniques created a high pressure sales environment
- little
information was given about risks
- some
firms had a poor understanding of the relevant law and consequences of
particular strategies
- firms
rarely referred consumers in financial hardship to free, alternative sources of
help or advised consumers that they could resolve the problem themselves at no
cost
- most
disputes brought to EDR schemes by debt management firms relate to arguments
about the removal of default listings on consumer credit reports
- while
an increasing number of consumers are being represented at EDR by debt
management firms, that is not leading to more credit reporting related disputes
being found in favour of consumers.
Committee inquiry
In its submission to the Committee Inquiry, the Personal
Insolvency Professionals Association (PIPA) argued that ‘a near perfect regime
of Debt Agreement is now being amended to create unforeseen implications for
debtors and the economy at large’.[44]
PIPA represents Registered Debt Agreement Administrators (RDAAs) whose members
are required to abide by a Code of Conduct.
PIPA argues for exempting the value of the family home
from the asset eligibility threshold (Schedule 1, Part 3, item 17 of the Bill),
on the grounds that, under the National Consumer
Credit Protection Act 2009, if a consumer could only comply with their
financial obligations by selling their principal place of residence, or the
consumer could only comply with those obligations with substantial hardship
(contrary to the intent in Schedule 1, Part 5, item 23 of the Bill).[45]
PIPA also had some concerns about the introduction of a percentage-based
payment to income ratio where the Minister has the power to determinate the
percentage by legislation instrument (Schedule 1, Part 4, item 21 of the
Bill);[46]
and on the three-year limit to debt agreements (Schedule 2, Part 1, item 1
of the Bill).[47]
These concerns largely relate to the imposition of a ‘one rule fits all’
approach which is too rigid. PIPA proposes automatic approval for debt
agreements which have an assured return to creditors; and, if zero votes are
received at the initial proposal, the debt agreement proposal be accepted as
proposed.
On the other hand, the Australian Restructuring Insolvency
and Turnaround Association (ARITA), considers that ‘the measures contained in
the Bill will improve trust and confidence in the debt agreement system’.[48]
ARITA raised some concerns with:
- the
proposal to double the debt agreement access threshold which applies to a
debtor’s property, while leaving threshold amounts for debts and income
unchanged[49]
- capping
the length of debt agreements to three years, to align with the period of
income contributions in bankruptcy[50]
- the
potential outcomes with the concurrent introduction of the Bill and the Bankruptcy
Amendment (Enterprise Incentives) Bill 2017 (which is proposing a reduction
in the default bankruptcy period to one year).[51]
The Australian Banker’s Association (ABA) does not support
the proposed reduction in the maximum term of a debt agreement, arguing that,
with more stringent requirements, longer term plans could be more successful.[52]
The additional requirements include a review of AFSA’s framework for debt
agreement proposal assessments, the establishment of an independent complaint
and dispute resolution mechanism for debtors, a re-examination of the impacts
of doubling the assets threshold for debtors combined with an ‘unseen
regulatory calibration methodology’, and a request to deal with ‘step ups’
whereby debtor payments increase in the final two years of an agreement.[53]
The Institute of Public Accountants (IPA) noted that the
overall benefits of the proposed amendments to the debt agreement legislation
may be ‘substantially affected’ if the proposed one-year bankruptcy term is
introduced.[54]
In particular:
- given
a choice between a debt agreement and bankruptcy, a debtor is more likely to
choose the administration with the shortest timeframe to completion[55]
and
- if
fewer debt agreements are entered into, the overall return to creditors may
fall (as the number of bankruptcies increase).[56]
In his submission, Professor Christopher Symes, a
bankruptcy law academic, expressed support for the Bill, and in particular, for
the three-year maximum term for debt agreements.[57]
He suggested publication of criteria to establish ‘fit and proper person’ in
the assessment of debt agreement administrators.[58]
Financial
implications
The Explanatory
Memorandum states that the Bill will have no direct financial impact.[59]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[60]
Parliamentary
Joint Committee on Human Rights
At the time of writing this Bills Digest, the
Parliamentary Joint Committee on Human Rights had not commented on the Bill.
Key issues
and provisions
This section examines the key provisions in Schedules 1 to
3, which contain the main amendments relating to debt agreements. Schedule 4
(which contains technical amendments) and Schedule 5 (which is concerned with
unclaimed money procedures) are addressed in the following section.
Schedule
1–Debt agreement proposals
Part
1–Persons who may be authorised to deal with debtor’s property
The amendments in Schedule 1 to the Bill modify the
requirements for, and treatment of, debt agreement proposals.
Currently subsection 185C(1) of the Bankruptcy Act
provides that a debtor who is insolvent may give the Official Receiver a
written proposal for a debt agreement. Subsection 185C(2) specifies the matters
which must be included in the debt agreement proposal. Items 1
and 2 amend subsection 185C(2) of the Bankruptcy Act so that only
a registered debt agreement administrator, registered trustee or the Official
Trustee can be authorised to administer a debt agreement. Currently, a
registered trustee, the Official Trustee or ‘other person’ can administer a
debt agreement, where ‘other person’ must pass a basic eligibility test (subsection
185E(2A) and cannot administer more than five debt agreements at a time
(subsection 185E(2B). Item 3 of Part 1 in Schedule 1 to the Bill makes
consequential amendments to section 185E of the Bankruptcy Act to repeal
these requirements.
Commencement
and application
Items 1–3 of Part 1 of Schedule 1 to the Bill
commence six months after Royal Assent.
The amendments will apply to debt agreement proposals
given to the Official Receiver on or after commencement.[61]
Item 5 is a transitional provision which allows the
Official Trustee to replace an unregistered administrator, 12 months after
Royal Assent. This gives an unregistered administrator an opportunity to register
as a debt agreement administrator or trustee if they wish to keep administering
the debt agreement(s) they are currently administering. If the Official Trustee
replaces an unregistered administrator and the replacement results in an
acquisition of property from the administrator otherwise than on just terms,
the Commonwealth is liable to pay compensation to the administrator.
Items 6–11 of Part 1 in Schedule 1 to the Bill are
minor consequential amendments which commence 12 months after Royal Assent.
Part 2—Reimbursement
of expenses
According to the Explanatory
Memorandum to the Bill:
Currently it is not clear what debt agreement administrators
can claim as expenses, how they may recover the expenses, and who bears the
cost of the expenses. Most debt agreement administrators recover expenses
directly from the funds held in trust for the administration of the debt
agreement. Debt agreement administrators take expenses in priority to creditors
which are party to the debt agreement, which reduces the creditors’ expected
return.[62]
Subsection 185C(3) of the Bankruptcy Act allows a
debt agreement proposal to provide for the remuneration of a debt
administrator—other than the Official Trustee. Subsection 185C(3A) provides
that the debt proposal agreement must specify the total remuneration of the
debt administrator, worked out as a percentage of the total amount payable by
the debtor.
Item 13 of Part 2 in Schedule 1 to the Bill provides
that a debt agreement proposal must detail the types of expenses the debt
agreement administrator can recover.[63]
Items 14 and 15 provide that the debt agreement administrator has
a duty to not reimburse themselves for expenses that were not specified in the
new subsection.[64]
Commencement
and application
The amendments in item 13 will apply to debt
agreement proposals given to the Official Receiver six months after Royal
Assent (item 16). Items 14 and 15 will apply to debt agreements
that come into force on or after commencement of item 16.
Part 3—Value
of debtor’s property
Currently, a debtor is prevented from giving the Official
Receiver a debt agreement proposal if, at the proposal time, the value of their
property that would be divisible among creditors if the debtor were bankrupt
(the assets threshold) is more than the threshold amount.[65]
As of 31 January 2018, this amount was $111,675.20.[66]
Item 17 amends subsection 185C(4) so that a debtor
cannot give the Official Receiver a debt agreement proposal if, amongst other
things, the value of the debtor’s divisible property is double the threshold
amount. According to the Explanatory
Memorandum, ‘recent rises in Australian property prices means that the
current threshold amount prevents a significant proportion of Australians from
accessing the debt agreement system’.[67]
Commencement
and application
The higher assets eligibility threshold will apply to debt
agreement proposals given to the Official Receiver six months after Royal
Assent (item 18).
Part 4—Payment
to income ratio
Currently there is no specific restriction on the size or
frequency of a debtor’s proposed payments under a debt agreement. Rather the Bankruptcy
Act requires that a debt agreement proposal given to the Official Receiver
must be accompanied by a certificate, signed by the debt agreement administrator
that he, or she, has reasonable grounds to believe that the debtor is likely to
be able to discharge the obligations created by the agreement as and when they
fall due.[68]
This does not always prevent debt agreements that could cause a debtor undue
financial hardship.
Item 20 amends the Bankruptcy Act to insert
another circumstance in which a debtor cannot give the Official Receiver a debt
agreement proposal, being if the total payments under the agreement exceed the
debtor’s income by a certain percentage.[69]
Item 21 provides that the Minister can determine this percentage by
legislative instrument.[70]
The Minister cannot delegate this legislative instrument
making power (item 19).
Commencement
and application
These provisions will apply to debt agreement proposals
given to the Official Receiver six months after Royal Assent (item 22).
Part 5—Undue
hardship to debtor
Item 23 provides that the Official Receiver can
refuse to accept a debt agreement proposal for processing if the Official
Receiver reasonably believes that complying with the debt agreement would cause
undue hardship to the debtor.[71]
The Bankruptcy Act does not define hardship or undue
hardship. Instead, it is up to the Court or the Official Trustee to
determine on a case by case basis.[72]
Commencement
and application
This amendment will apply to debt agreement proposals
given to the Official Receiver six months after Royal Assent (item 24).
Part 6—Other
matters
Item 25 inserts a new definition into section 185
for a proposed administrator, in relation to a debt agreement
proposal.[73]
Opaqueness of a proposed administrator’s relationships can
be problematic if an affected creditor under the proposed debt agreement is a
related entity of the proposed administrator.[74]
Section 5 of the Bankruptcy Act defines the term related
entity, in relation to a person, as any of the following:
(a) a relative of the
person
(b) a body corporate of
which the person, or a relative of the person, is a director
(c) a body corporate
that is related to the body corporate referred to in paragraph (b)
(d) a director, or a
relative of a director, of a body corporate referred to in paragraph (b) or (c)
(e) a beneficiary under a
trust of which the person, or a relative of the person, is a trustee
(f) a relative
of such a beneficiary
(g) a relative of the
spouse, or de facto partner, of such a beneficiary
(h) a trustee of a trust
under which the person, or a relative of the person, is a beneficiary
(i) a member
of a partnership of which the person, or a relative of the person, is a member.
Item 33 of Part 6 in Schedule 1 to the Bill amends
the Bankruptcy Act to require the proposed administrator to record
details of any broker or referrer information and to declare whether an
affected creditor is also a related entity.[75]
The Official Receiver will be required to send this information to affected
creditors (item 38), permitting them to review an administrator’s
relationships and help to ensure that the voting process (on whether to accept
a debt agreement proposal) is ‘fair and transparent’.[76]
To avoid potential conflicts of interest, item 39 of
Part 6 in Schedule 1 to the Bill provides that the Official Receiver should not
request a vote from a proposed administrator that is an affected creditor or
from a related entity to the proposed administrator.[77]
To ensure that the results of a vote are not impacted by
potential conflicts of interest, item 40 amends the acceptance rule to
require the Official Receiver to disregard any votes received from the proposed
administrator or related entity of the proposed administrator.[78]
The conflict of interest concerns underlying amendments in
items 39 and 40 do not apply where a debtor proposes to self-administer
their own debt agreement and an affected creditor is a related entity.
Item 41 creates a criminal offence where a proposed
administrator gives, agrees, or offers to give an affected creditor an
incentive for voting a certain way on a debt agreement proposal.[79]
The maximum penalty is three months imprisonment.[80]
The Explanatory
Memorandum states that ‘this punishment is appropriate to deter fraudulent
conduct in the financial sector which can have severe consequences for both
affected creditors and debtors’.[81]
Schedule 2—Debt
agreements
The amendments in Schedule 2 to the Bill set standards for
the operation of debt agreements, covering their length, and arrangements for
termination and voiding. The amendments also cover an administrator’s duties in
their administration of debt agreements.
Part 1—Length
of debt agreements
There is currently no limit on the proposed timeframe for
making payments under a proposed debt agreement. Item 1 inserts proposed
subsection 185C(2AA) into the Bankruptcy Act so that a debt
agreement proposal must not provide that the debtor may make payments under the
agreement for a period longer than three years. This three year timeframe
aligns with the length of income contributions under bankruptcy. This
limitation does not prevent a debt agreement from running longer than the
proposed timeframe, if the obligations have not been discharged three years
after the day the agreement was made.[82]
Item 2 inserts a reference to this amendment into
paragraph 185E(2)(a) to ensure that the Official Receiver does not accept a
debt agreement proposal for processing if it proposes to make payments under
the agreement for a timeframe longer than three years.
Under subsection 185M(1) of the Bankruptcy Act, a
debtor or creditor who is a party to a debt agreement may give the Official
Receiver a written proposal to vary the debt agreement. Item 3 ensures debtors
and creditors under existing debt agreements cannot propose a variation if the
timeframe for making payments under the agreement would be longer than three
years from the day the agreement was made.[83]
Item 4 of Part 1 in Schedule 2 to the Bill inserts a reference to this
amendment into subsection 185M(2) to ensure that the Official Receiver does not
process the variation if the proposed timeframe for making payments would be
longer than three years from the day the agreement was made.
Commencement
and application
The amendments under items 1 and 2 apply to debt
agreement proposals given to the Official Receiver on or after six months after
Royal Assent. The amendments relating to debt agreement variations (under items
3 and 4) will apply in relation to debt agreements that come into force on
or after six months after Royal Assent where the debt agreement proposals were
given on or after that commencement.
Part 2—Proposals
to vary debt agreements
The proposed amendments outlined above mean that a debtor
cannot give the Official Receiver a debt agreement proposal if the total
payments under the agreement exceed the debtor’s income by a certain
percentage,[84]
with the percentage determined by the Minister.[85]
Limiting the proposed timeframe for making payments under a debt agreement to
three years,[86]
allows the Minister to calibrate the percentage to a three-year payment
schedule.
Key issue—Sustainability
As stated above, the Bankruptcy Act requires a debt
agreement proposal given to the Official Receiver to be accompanied by a
certificate, signed by the debt agreement administrator that he, or she, has
reasonable grounds to believe that the debtor is likely to be able to discharge
the obligations created by the agreement as and when they fall due.[87]
No such requirement exists in relation to a variation proposal made under
section 185M of the Bankruptcy Act. Item 7 inserts proposed
subsections 185M(1E) and (1F) into the Bankruptcy Act so that a
certificate in equivalent terms is provided where a proposal is made to vary a
debt agreement. The variation proposal is required to meet the same percentage
constraint as the initial debt agreement proposal.
Item 9 inserts proposed amendments which provide:
- the
Official Receiver can refuse to accept a debt agreement variation proposal if he
or she reasonably believes that complying with the debt agreement (as proposed
to be varied) would cause undue hardship to the debtor[88]
- if
the Official Receiver decides not to proceed with a variation proposal (as
above), he or she must give notice of the decision and the reasons for it,[89]
and the debtor or affected creditors may apply to the Administrative Appeals
Tribunal for a review of the decision.[90]
Key issue—Conflicts
of interest
Item 10 deals with conflicts of interest that may
arise if the debt agreement administrator is a creditor in a debt agreement
variation proposal. It inserts amendments which relate to the procedures
for dealing with proposals to vary debt agreements: the Official Receiver
should not request a vote on a debt agreement variation proposal from a debt
agreement administrator that is an affected creditor,[91]
or, who on becoming an affected creditor, is a related entity of the
administrator.[92]
These restrictions do not apply if the debtor is self-administering their debt
agreement.[93]
Currently section 185MC sets out the rule for acceptance
of a proposal to vary a debt agreement. Item 11 inserts proposed
subsections 185MC(1A) and (1B) into the Bankruptcy Act to amend the acceptance
rule by requiring the Official Trustee to disregard any votes from the proposed
administrator or a related entity of the proposed administrator.[94]
Key issue—Valuable
consideration
Item 12 creates a criminal offence where a debt
agreement administrator gives, agrees or offers to give to an affected
creditor, any valuable consideration with a view to securing the affected
creditor’s acceptance or non-acceptance of the proposal to vary a debt
agreement.[95]
The maximum penalty for contravention of this subsection is three months
imprisonment, with the Explanatory
Memorandum stating that ‘[t]his punishment is appropriate to deter
fraudulent conduct in the financial sector which can have severe consequences
for both creditors and debtors’.[96]
Commencement
and application
The amendments in Part 2 of Schedule 2 to the Bill apply
to debt agreements which are proposed six months after Royal Assent.
Part 3—Proposals
to terminate debt agreements
Items 14 and 15 deal with conflict of
interest concerns in the voting of a proposal to terminate a debt agreement.[97]
The provisions mirror those in items 10 and 11 in Part 2 of Schedule 2 as
discussed above.
Item 16 creates a criminal offence where a debt
agreement administrator gives, agrees or offers to give to an affected
creditor, any valuable consideration with a view to securing the affected
creditor’s acceptance or non-acceptance of the proposal to terminate a debt
agreement.[98]
The maximum penalty for the offence is three months imprisonment.
Commencement
and application
The amendments in Part 3 of Schedule 2 to the Bill apply
to debt agreements proposed six months after Royal Assent.
Part 4—Court
orders to terminate debt agreements
Currently, the Court can make an order to terminate a debt
agreement in certain circumstances, including:
- failure
of a debtor to carry out the term of the agreement, or
- if
carrying out the agreement would cause injustice or undue delay to the
creditors or debtor, or
- if
it is in the creditors’ interests to do so.[99]
Item 18 amends the Bankruptcy Act to expand
the list of reasons for which the Court may make an order to terminate a debt
agreement. The additional reasons are that the administrator has contravened
any of the proposed subsections which make it an offence for the agreement
administrator to give, agree or offer to give to an affected creditor, any
valuable consideration (for a vote on a proposal to accept, vary or terminate a
debt agreement) with a view to securing the affected creditor’s acceptance or
non-acceptance of the proposal.[100]
Part 5—Voiding
debt agreements
Section 185T of the Bankruptcy Act provides that a
debtor, creditor or the Official Receiver may apply to the Court for an order
declaring that all, or a specific part, of a debt agreement is void. This is
currently limited to two circumstances:
- if
all or part of the debt agreement was not made in accordance with, or in
compliance with Part IX of the Bankruptcy Act, or
- if
the statement of affairs lodged with the debt agreement omitted a material
particular or was incorrect.[101]
If an application under section 185T is successful, the
Court may make an order to declare a debt agreement void.[102]
In that case, the Court may also make ancillary orders including an order
directing a person to pay another person compensation.[103]
This enables the Court to put a debtor into a similar position as they would
have been had the debt agreement not been entered into.
Items 19–21 in Part 5 of Schedule 2 to the Bill
amend subsection 185T(2) to extend the grounds on which an application can be
made to the Court for an order declaring that a debt agreement is void to
include instances where an administrator:
- has
committed a breach of duty in relation to the agreement, or
- has
breached a condition in an instrument under registration provisions either as
an individual or as a company, or
- has
breached a condition imposed under registration requirements.[104]
These amendments ensure that a debtor can be put into a
similar position they would have been had the debt agreement not been entered
into. This includes removing the debtor’s name from the NPII, awarding damages,
and declaring that the debtor has not committed an act of bankruptcy.
Commencement
and application
The amendments in Part 5 of Schedule 2 to the Bill apply
to debt agreements that come into force six months after Royal Assent.
Part 6—Debt
agreement administrators to refer evidence of offences
Section 19 of the Bankruptcy Act, sets out the
duties of the trustee of the estate of a bankrupt including, amongst other
things, the duty to consider whether the bankrupt has committed any offences
under the Bankruptcy Act, and if so, the duty to refer any
evidence of the offence to the Inspector-General or to relevant law enforcement
authorities.[105]
Item 23 amends section 185LA of the Bankruptcy
Act to extend the duties of a debt agreement administrator to reflect those
duties conferred on a bankruptcy trustee, which are discussed above.[106]
Commencement
and application
The amendments made in Part 6 of Schedule 2 to the Bill apply
in relation to debt agreements that come into force six months after Royal
Assent.
Part 7—Reporting
requirements for debtors in arrears
Section 185LB of the Bankruptcy Act requires the administrator
of a debt agreement to notify creditors of a three-month arrears default by a
debtor in certain circumstances. This obligation applies regardless of the
amount in arrears.
Items 25–27 amend subsection 185LB(3) of the Bankruptcy
Act to increase the threshold by which an administrator is obliged to
report a three-month arrears default. The proposed amendments provide that
administrators are only required to report to creditors if:
- the
value of the arrears exceeds either 20 per cent of the payment due for the
period or $300, whichever is higher, or
- the
value of all due payments was $300 or less, and no payment was made in that
period.[107]
Commencement
and application
The amendments in Part 7 of Schedule 2 to the Bill apply
in relation to debt agreements that come into force six months after Royal
Assent.
Part 8—Alignment
of offences
Separate
bank accounts
Schedule 2 to the Bankruptcy Act is the Insolvency
Practice Schedule (Bankruptcy). One of the primary objects of the Schedule is
to regulate the administration of regulated debtors’ estates consistently,
unless there is a clear reason to treat a matter that arises in relation to a
particular kind of estate differently.[108]
In particular, Division 65 of Schedule 2 deals with funds handling.
The purpose of the amendments in Part 8 of Schedule 2 to
the Bill is to align the provisions relating to debt agreements with those in
Schedule 2.[109]
Subsection 185(LD)(1) of the Bankruptcy Act requires a debt agreement
administrator who is the administrator of one or more debt agreements to pay
all monies received from debtors into a single trust account in the debt
agreement administrator’s own name. Item 29 inserts proposed
subsection 185LD(2A) into the Bankruptcy Act to prohibit debt
agreement administrators from paying any money out of that bank account, other
than for purposes of administration of the debt agreement, in accordance with
the Bankruptcy Act, or by direction of the Court.
Failure to comply with provisions relating to payments
into and out of administration accounts gives rise to an offence of strict
liability, the maximum penalty for which is 50 penalty units.[110]
Item 30 inserts a new strict liability offence provision of 50 penalty
units for contravention of existing subsections relating to maintenance of a
separate bank account for debt agreement money and payments made to the bank
account, and the proposed amendment relating to payments made out of said bank
account.[111]
The Explanatory
Memorandum states that ‘[s]trict liability offences are appropriate ... as it
is necessary to strongly deter misconduct that can have serious consequences
for affected parties’.[112]
Sufficient
records
Division 70 of Schedule 2 to the Bankruptcy Act
provides that bankruptcy trustees and debt agreement administrators are
required to keep sufficient records as are necessary to give a full and correct
account of either the administration of the estate or the administration of the
debt agreement, respectively, and to make such records available to the
Inspector-General if so required. Failure to comply with these provisions
currently attaches a strict liability offence of five penalty units for
bankruptcy trustees.[113]
Item 31 aligns existing section 185LE with Schedule 2 in that it creates
an offence of strict liability with a maximum penalty of five penalty units for
debt agreement administrators, consistent with the provision relating to
bankruptcy trustees.[114]
As an alternative to prosecution, a penalty can be imposed
through an infringement notice. The amount payable in respect of an
infringement notice for a breach of a specific section of the Bankruptcy Act
is set out in table form in subsection 277B(2). Item 32 amends the table
so that a breach of the requirement to keep sufficient records and make the
records available for audit can, where appropriate, be addressed by way of an
infringement notice with an amount payable to the value of one penalty unit.
This aligns with the penalty amounts set out for the equivalent section
relating to trustees.
Commencement
and application
The amendment in item 29, prohibiting money to be
paid out of the trust account in certain circumstances, will apply in relation
to debt agreement proposals that come into force on, after, or were in force
immediately before the period six months after Royal Assent. As noted in the Explanatory
Memorandum, ‘[t]he retrospective application of this duty reflects the
seriousness of breaching it’.[115]
Items 30, 31 and 32 will apply in relation to debt agreements that come
into force on or after six months after Royal Assent.
Part 9—Time
for submitting annual returns
Currently, section 185LEA provides that a debt agreement
administrator must give the Inspector-General an annual return detailing
information on active debt agreements managed by the administrator within 35
days after the financial year. The corresponding deadline for registered
bankruptcy trustees is 25 business days.[116]
Item 34 amends section 185LEA of the Bankruptcy
Act so that the applicable deadline for annual return submissions for debt
agreement administrators is reduced to 25 business days after the end of the financial
year.
Commencement
and application
The amendment made in Part 9 of Schedule 2 to the Bill applies
in relation to financial years ending six months after Royal Assent.
Schedule 3—Registered
debt agreement administrators
The amendments in Schedule 3 to the Bill modify the
standards that registered debt agreement administrators must satisfy.
Part 1—Applications
for registration
Insurance
Registered bankruptcy trustees are required to take out
professional indemnity insurance and fidelity insurance to qualify for
registration.[117]
There is no current similar requirement for debt agreement administrators.
Items 6–13 insert provisions that require debt
agreement administrators to obtain adequate and appropriate professional
indemnity and fidelity insurance, in order to have their applications for
registration and renewal of registration approved by the Official Receiver.
Section 185 provides definitions for Part IX of the Bankruptcy
Act. Item 1 of Part 1 in Schedule 3 to the Bill inserts proposed
definitions of adequate and appropriate fidelity insurance and adequate
and appropriate professional indemnity insurance into that section. Item
2 provides that the Inspector-General may determine, in a legislative
instrument, what constitutes adequate and appropriate insurance.[118]
This aligns with the equivalent provision for bankruptcy trustees.[119]
Interview
To become a registered bankruptcy trustee, a person must
lodge an application with the Inspector-General, who will then convene a
committee to consider the application. The committee must interview the
applicant and decide within 45 business days after interviewing the applicant whether
the applicant should be registered as a trustee or not.[120]
Item 3 amends the Bankruptcy Act to require
the Inspector-General to interview applicants for debt registration ‘as soon as
practicable after receiving the application’.[121]
Item 4 amends the Inspector-General’s deadline for making a decision to
45 business days after the date of interview (rather than 60 days after
receiving the application).[122]
These provisions are designed to align the obligations for
the assessment of registrations for debt agreement administrators and
bankruptcy trustees.
Evidence
Currently, subsection 186C(2) of the Bankruptcy Act
sets out the matters about which the Inspector-General must be satisfied in
deciding whether to approve the registration of a debt administrator. Items
5 and 6 expand the list of matters to include:
- written
evidence that the applicant has taken out adequate and appropriate professional
indemnity insurance and fidelity insurance[123]
- the
applicant is a fit and proper person.[124]
These requirements align with the equivalent provisions
for bankruptcy trustees.[125]
Items 8–12 contain similar provisions for
registration applications by companies. Item 12 requires the company
applicant to be a fit and proper person, and each director of the company to be
a fit and proper person, in order for the Inspector-General to approve an
application for registration as a debt agreement administrator.[126]
Registration
renewal
Currently, the Inspector-General must approve an
individual debt agreement administrator’s application for registration renewal.[127]
The corresponding registered bankruptcy trustee renewal system imposes a
restriction: a trustee’s registration must not be extended if they owe more
than $500 (being the current prescribed amount) of notified estate charges.[128]
To align with the equivalent provisions for registration
renewal for bankruptcy trustees, item 7 repeals and replaces subsection
186C(3) of the Bankruptcy Act to require the Inspector-General to
approve an application for debt agreement administrator registration renewal if,
amongst other things, there is evidence of adequate and appropriate insurance
and the applicant does not owe more than the prescribed amount of notified
estate charges. Proposed subsection 186C(5A) which is inserted
by item 13 of Part 1 in Schedule 3 to the Bill provides that a person
owes a notified estate charge if:
- the
person owes either a charge under the Bankruptcy (Estate
Charges) Act 1997 or a penalty under section 281 (late payment penalty)
under the Bankruptcy Act, and
- the
Inspector-General has notified the person of the unpaid estate charge at least
one month and 10 business days before the person’s registration as a debt
agreement administrator ceases to be in force.
Note that, unlike the requirement for bankruptcy trustee
registration renewal, any amount of notified estate charges owing applies to
debt agreement administrator renewals.
Commencement
and application
The amendments in Part 1 of Schedule 3 to the Bill apply
in relation to applications for registration and renewal of registration as a
debt agreement administrator made on or after six months after Royal Assent.
Part 2—Conditions
of registration
Section 105-1 of Schedule 2 to the Bankruptcy Act
provides the Minister with the power to create practice standards for
registered bankruptcy trustees. Currently the Minister has no power to set
industry standards for registered debt agreement administrators.
Items 16–18 provide that the registration of
individual and company debt agreement administrators is subject to conditions
determined in a legislative instrument.[129]
The Minister will be given the power to make the associated legislative
instruments for the purposes of determining the conditions.[130]
Subsection 10(1) currently provides that the Minister may
delegate any or all of the Minister’s powers under the Bankruptcy Act,
other than the power of delegation. Item 15 amends subsection 10(1) to
provide that the Minister cannot delegate the legislative instrument-making
powers which are created as set out above.[131]
Existing subsection 186H(1) provides that a debt agreement
administrator may apply to the Inspector-General to have any conditions on
their registration changed or removed. Item 19 inserts proposed
subsection 186H(1A) into the Bankruptcy Act to ensure that
conditions determined in a legislative instrument (under items 16 and 17)
cannot be removed upon application by a debt agreement administrator.[132]
Commencement
and application
Item 20 provides that the amendments in Part 2 of
Schedule 3 to the Bill apply to all registered debt agreement administrators
regardless of whether they became registered before or after six months after
Royal Assent.
Part 3—Ongoing
obligation to maintain insurance
Item 21 inserts proposed Subdivision
BA—Insurance into Division 8 of Part IX of the Bankruptcy Act. Within the
new Subdivision, proposed section 186HA mandates that registered debt
agreement administrators must maintain adequate and appropriate professional
indemnity and fidelity insurance, and that failure to do so amounts to an
offence. In the case of intentional or reckless failure, a penalty of 1,000
penalty units will apply;[133]
otherwise, failure to comply is considered a strict liability offence with a
penalty of 60 penalty units. Registered bankruptcy trustees are subject to
similar provisions.[134]
Commencement
and application
The obligation for debt agreement administrators to
maintain insurance applies to registered debt agreement administrators who
applied for registration on or after six months after Royal Assent (item 22).
Part 4—Cancellation
of registration
Section 186K of the Bankruptcy Act sets out the
circumstances in which the Inspector-General may cancel an individual’s
registration as a debt agreement administrator. The equivalent provisions for
company debt agreement administrators are set out in section 186L.
Items 23 and 24 amend those sections to expand the
grounds under which the Inspector-General may request a written explanation
from the debt agreement administrator to justify their continued registration.[135]
These include:
- a
failure to have adequate and appropriate professional indemnity or fidelity
insurance, or
- the
administrator (or company or director of the company) is not a fit and proper
person.
These amendments will enable the Inspector-General to
cancel a debt agreement administrator’s registration if:
- the
debt agreement administrator does not respond to the written request within 28
days, or
- an
explanation is received, but the Inspector-General is not satisfied with it.
Commencement
and application
The obligation for debt agreement administrators to
maintain insurance and be a fit and proper person applies to registered debt
agreement administrators who applied for registration six months after Royal
Assent (item 25).
Part 5—Trust
accounts
Subsection 186LA(1) of the Bankruptcy Act sets out
the conditions under which the Inspector-General may obtain information about
debt agreement administration trust accounts. Currently, if the
Inspector-General reasonably believes that a debt agreement administrator is
misusing trust money, he or she is empowered to give notice to the bank
requiring that specified information about the relevant account is provided in
the manner and within the time specified in the notice. Item 26 inserts proposed
subsection 186LA(1A) into the Bankruptcy Act empowering the
Inspector-General to give notice to the bank to obtain information if the
Inspector-General ‘reasonably suspects’ that the debt agreement administrator
has:
- contravened
a provision of the Bankruptcy Act
- failed
to properly carry out the duties of an administrator in relation to the debt
agreement or
- contravened
a condition of the person’s registration as a registered debt agreement
administrator.[136]
Commencement
and application
The amendments in this part will apply to debt agreements
that come into force on or after six months after Royal Assent.
Part 6—Functions
of Inspector-General
Section 12 of the Bankruptcy Act sets out the
functions of the Inspector-General. The Explanatory
Memorandum states that the Inspector-General’s powers to investigate and
inquire into a debt administrator’s conduct, applies only once a debt agreement
is made.[137]
However, subsection 12(1BA) states:
[t]he Inspector‑General may make an inquiry or
investigation under paragraph (1)(b), (ba), (bb) or (bc) at any time,
whether before or after the end of the bankruptcy, composition, scheme or
agreement or administration concerned
The reference to paragraph (bb) is a reference to the
conduct of an administrator of a debt agreement.
Item 28 inserts proposed paragraph 12(1)(bd)
into the Bankruptcy Act to put beyond doubt that the Inspector-General’s
investigation and inquiry powers extend to any conduct of a debt
agreement administrator. This permits the Inspector-General to investigate or
inquire into the conduct of a debt agreement administrator even if an agreement
is not ultimately made, and into a debt agreement administrator’s advertising
or other methods used to attract debtors.
Commencement
and application
The amendments in Part 6 of Schedule 3 to the Bill provide
that the Inspector-General will be able to investigate the conduct of a debt
agreement administrator that has occurred on or after six months after Royal
Assent, regardless of whether the administrator was registered before, on or
after then.
Other provisions
Schedule 4—Registered
trustees
The amendments in Schedule 4 are technical amendments.
They also clarify that the Minister’s power to make rules under the Insolvency
Practice Rules extends to registered trustees administering debt agreements.
Item 1 moves the Minister’s inability to delegate
its power to make Insolvency Practice Rules by legislative instrument from
subsection 105-1(6) in Schedule 2 of the Bankruptcy Act to subsection
10(1).
To ensure that the Insolvency Practice Rules reflect
similar industry conditions for registered bankruptcy trustees administering
debt agreements, item 2 clarifies that the Minister’s power to amend the
Insolvency Practice Rules extends to amendments for the purposes of imposing
conditions on registered bankruptcy trustees administering debt agreements.[138]
Commencement
and application
The amendments contained in this schedule will apply to a
person who becomes a registered trustee, or registered trustees who are
registered immediately before, six months after Royal Assent.
Schedule 5—Unclaimed
money
The amendments in Schedule 5 to the Bill modify the
requirements for registered personal insolvency practitioners to pay unclaimed
moneys to the Commonwealth, as well as the process for persons to apply for
unclaimed moneys.
A bankruptcy is annulled if the trustee is satisfied that
all the bankrupt’s debts have been paid in full.[139]
If money is paid to the Official Receiver because the creditor cannot be found
or identified, it is taken to be paid in full to the creditor. Currently, if
money is paid to the Official Receiver, a person who claims to be entitled to
any moneys is required to make an administrative claim to the Court.[140]
Item 1 amends subsection 153A(5) of the Bankruptcy
Act to enable a person to make an administrative claim to the Official
Receiver rather than the Court. The Explanatory
Memorandum notes that, in many instances, the costs of seeking a court
order would exceed the amount of money that is being sought. Item 4 repeals
existing subsections 254(3) and (4) and inserts proposed subsections
254(3)–(9) which set out the processes for making, assessing and giving
notice of the outcome of an application as well as a mechanism for review of
the Official Receiver’s original determination by the Court.
If the trustee of a deceased person’s estate is satisfied
that all the debts of the estate have been paid in full, the order for the
administration of the estate under Part IX of the Bankruptcy Act is
annulled.[141]
Item 2 enables a person to make an administrative claim to the Official
Receiver rather than the Court.[142]
A trustee or debt agreement administrator must pay to the
Commonwealth any unclaimed dividends or moneys. The requirement for a debt
agreement administrator to pay unclaimed dividends or moneys should only apply
where the debt agreement administrator has identified the person entitled to
the moneys.
Item 3 ensures that this requirement—to pay any
unclaimed dividends or money to the Commonwealth—applies where the person
entitled to the money has been identified but is unable to be located despite
the debt agreement administrator making ‘all reasonable efforts’.[143]
Application
and saving provisions
Item 5 provides that:
- a
person can apply to the Official Receiver for unclaimed moneys paid to the
Commonwealth on or after six months after Royal Assent
- a
person can apply to the Official Receiver for unclaimed moneys paid to the
Commonwealth before six months after Royal Assent, where an application had not
previously been made to the Court and
- where
a person has applied to the Court for an order for moneys owing before six
months after Royal Assent, the subsections as in force immediately before six
months after Royal Assent shall continue to apply.
Appendix 1: Personal insolvencies, Australia
Figure 1: Personal insolvencies, Australia 1986–87 to 2016–17
Source: AFSA, ‘Time series’, AFSA
website.
Appendix 2: Formal options for insolvency
Table A1: Eligibility
|
Bankruptcy
|
Debt agreements
|
Personal insolvency
agreements
|
Australian connection
|
Must have a residential
or business connection.
|
No residential or
business connection required.
|
Must have a residential
or business connection.
|
Previous insolvency
|
While previous insolvency
does not by itself make a person in eligible, the Official Receiver may not
accept the petition if the debtor was previously bankrupt and some other
conditions are met.
|
Must not have been a
bankrupt, proposed a personal insolvency agreement or made a debt agreement
in the previous 10 years.
|
Must not have proposed
another personal insolvency agreement in the previous six months.
|
Income threshold
|
No
|
A person cannot propose a
debt agreement if their after tax income for the year is more than $83,756.40.
|
No
|
Asset threshold
|
No
|
A person cannot propose a
debt agreement if their divisible property is more than $111,675.20.
|
No
|
Debt threshold
|
No
|
A person cannot propose a
debt agreement if their unsecured debts are more than $111,675.20.
|
No
|
Source: AFSA, ‘Compare
the formal options’, AFSA website.
Table A2: Income, employment and trade
|
Bankruptcy
|
Debt agreements
|
Personal insolvency
agreements
|
Payments from income
required?
|
Yes, mandatory payments
required if income exceeds the statutory threshold—these are on the AFSA
website.
|
Yes, if the terms of the agreement
require payments from income—this occurs in most cases.
|
Only if the terms of the
agreement require payments from income.
|
Ability to continue to
operate a business
|
It depends on the nature
of the business and if the trustee sells the business assets. Key points
include:
- when a partner becomes bankrupt
it dissolves an existing partnership
- if trading under a business or
assumed name after the date of bankruptcy, a bankrupt must disclose their
bankruptcy to people dealing with the business. This will include bankrupts
trading alone or jointly.
|
Yes, unless the terms of
the agreement provide otherwise. If trading under a business name or assumed
name (whether alone or in partnership) the debt agreement must be disclosed
to all people dealing with the business.
|
Yes, if the agreement
allows for the debtor to continue to operate the business.
|
Ability to be a
director of, or otherwise manage, a corporation
|
No
|
Yes
|
Not until the terms of
the agreement are fully complied with.
|
Other employment
restrictions
|
Professional bodies
and/or trade associations may have certain conditions of membership for the
duration of the bankruptcy. There may be restrictions on holding some
statutory positions during the period of bankruptcy.
|
Professional bodies
and/or trade associations may have certain conditions of membership for the
duration of the agreement. There may be restrictions on holding some
statutory positions during the period of the agreement.
|
Professional bodies
and/or trade associations may have certain conditions of membership for the
duration of the agreement. There may be restrictions on holding some
statutory positions during the period of the agreement.
|
Source: AFSA, ‘Compare
the formal options’, AFSA website.
Table A3: Assets
|
Bankruptcy
|
Debt agreements
|
Personal insolvency
agreements
|
Ability to retain
assets
|
No, unless it is exempt
property (for example household furniture, tools of trade up to a certain
value).
|
Yes, unless terms of the
agreement provide otherwise.
|
Yes, subject to the terms
of the agreement.
|
Ability to retain
assets acquired during the period of the agreement/ bankruptcy
|
No, unless property being
acquired is exempt property.
|
Yes
|
Yes
|
Can assets previously
sold or transferred for less than market value be recovered?
|
Yes, subject to certain
statutory conditions being met.
|
No
|
Not unless the agreement
specifies that the antecedent transaction provisions of the Bankruptcy Act
apply to the debtor.
|
Can payments made to
creditors prior to the agreement/ bankruptcy be recovered?
|
Yes, subject to certain
statutory conditions being met.
|
No
|
Not unless the agreement
specifies that the antecedent transaction provisions of the Bankruptcy Act
apply to the debtor.
|
Source: AFSA, ‘Compare
the formal options’, AFSA website.
Table A4: Debts
|
Bankruptcy
|
Debt agreements
|
Personal insolvency
agreements
|
Unsecured debts
|
Unsecured creditors
receive pro rata payment from funds recovered by the trustee after fees and
costs have been deducted. There are some statutory priority payments to
particular classes of creditors like employees.
|
All unsecured creditors
receive pro rata payments.
|
Unsecured creditors can
receive differential payment rates if the terms of the agreement provide for
this. There are some statutory priority payments to particular classes of
creditors like employees.
|
Secured debts
|
Rights of secured
creditors are not affected. They can repossess assets if there is default in
payment.
|
Rights of secured
creditors are not affected. They can repossess assets if there is default in
payment.
|
Rights of secured
creditors are not affected. They can repossess assets if there is default in
payment.
|
Release from debts
|
Upon discharge from
bankruptcy, but not released from some types of debt.
|
Upon completing terms of
agreement, but not released from some types of debt.
|
As per terms of the
agreement, but not released from some types of debt.
|
AFSA, ‘Compare
the formal options’, AFSA website.
Table A5: Restrictions
|
Bankruptcy
|
Debt agreements
|
Personal insolvency
agreements
|
Ability to travel
overseas
|
Prior consent of trustee
required. A fee is payable where the trustee is the Official Trustee ($150).
|
No statutory restriction.
|
No statutory restriction.
|
Ability to travel
within Australia
|
No statutory restriction.
|
No statutory restriction.
|
No statutory restriction.
|
Incurring further debt
|
Must disclose insolvency
if incurring debt or obtaining goods and services in excess of $5,681.
|
Must disclose insolvency
if incurring debt or obtaining goods and services in excess of $5,681.
|
No statutory restriction.
|
AFSA, ‘Compare
the formal options’, AFSA website.
Table A6: Fees and charges
|
Bankruptcy |
Debt agreements |
Personal insolvency
agreements |
Statutory filing fee |
No |
Yes, $200. |
Yes, $240. |
Statutory levies |
A government levy is
imposed on all receipts in the administration. Any interest earned on these
receipts is also paid to the government. |
A government levy is
imposed on all receipts in the administration. Any interest earned on these
receipts is also paid to the government. |
A government levy is
imposed on all receipts in the administration. Any interest earned on these
receipts is also paid to the government. |
Fees for
administration of the estate/s |
Subject to creditor
approval. Fees can be reviewed upon application to the Inspector-General. Official Trustee’s fees
are set by statute. |
Subject to creditor
approval. Official Trustee’s fees
are set by statute. |
Subject to creditor
approval. Fees can be reviewed upon application to the Inspector -General. Official Trustee’s fees
are set by statute. |
AFSA, ‘Compare
the formal options’, AFSA website.
[1]. Australian
Financial Security Authority (AFSA), ‘Introduction
to AFSA’, AFSA
website.
[2]. AFSA,
‘What
are my options for dealing with unmanageable debt?’, AFSA website; M Lane,
‘When
does the initially unpalatable become palatable?’, Worrells website, 2 May
2017.
[3]. AFSA,
‘Compare
the formal options’, AFSA website.
[4]. Bankruptcy
Act, section 5 defines this as the stay period.
[5]. AFSA,
‘What
is a declaration of intention to present a debtor’s petition (DOI)?’, AFSA
website.
[6]. Bankruptcy
is the legal process by which ‘the assets of a person who cannot pay his or her
debts are removed from the person’s control (sequestered), placed in the hands
of a trustee and distributed to creditors in the way the state has determined
will best satisfy the competing interests involved’. T Mann (ed), Australian
Law Dictionary, Oxford University Press, 2017; Bankruptcy Act,
section 40 sets out the acts of bankruptcy.
[7]. AFSA,
‘What
are the consequences of bankruptcy?’, AFSA website; Bankruptcy Act,
section 77.
[8]. This
default period may change to one year with the successful passage of the Bankruptcy
Amendment (Enterprise Incentives) Bill 2017 which is currently before the
Senate. Bankruptcy Act, section 149.
[9]. AFSA,
‘What
is a personal insolvency agreement?’, AFSA website. AFSA charges a $240
document processing fee when controlling trustee authority is lodged with AFSA,
and 20 per cent of the value of the proposal accepted by creditors as an
administration fee. AFSA, ‘Fees
and charges’, AFSA website.
[10]. T
Mann (ed), Australian Law Dictionary, op. cit., See also I Ramsay and C
Sim, ‘Personal
insolvency trends in Australia 1990–2008’, Insolvency Law Journal,
17(2), pp. 69–103.
[11]. D
Williams (Attorney General and Minister for Justice), ‘Second
reading speech: Bankruptcy Legislation Amendment Bill 1996’, House of
Representatives, Debates, 26 June 1996, p. 2825.
[12]. Bankruptcy
Act, sections 185C, 185D and 185E.
[13]. AFSA,
‘Indexed
amounts’, AFSA website, last updated 18 January 2018. Limits are updated
twice a year on 20 March and 20 September.
[14]. AFSA,
‘What
is a debt agreement?’, AFSA website.
Penalties and fines, Higher Education Contributions Scheme (HECS) debt and
child support obligations cannot be included in a debt agreement and thus
remain payable after the agreement is completed.
[15]. Bankruptcy
Act, paragraph 185EC(1)(b).
[16]. A
typical debt agreement may include the debtor paying the same amount as their
outstanding debts over three to five years, with about 20 to 30 per cent going
to the debt agreement administrator and the remaining 70 to 80 per cent going
to creditors. Financial Rights Legal Centre, Submission
to Treasury, National Innovation and Science Agenda – Improving
bankruptcy and insolvency laws, May 2016. AFSA charges $200 to lodge a debt
agreement proposal, and 20 per cent of the value of the proposal accepted by
creditors for administering a debt agreement. AFSA, ‘Fees
and charges’, AFSA website.
[17]. The
AFSA ‘Debt
comparison table’ shows which unsecured debts a debt agreement will cover,
AFSA website.
[18]. Protected
property under bankruptcy includes tools up to the value of $3,700 and vehicles
up to the value of $7,800. AFSA, ‘Indexed
amounts’, AFSA website, last updated 18 January 2018.
[19]. AFSA,
‘What
are the consequences of a debt agreement?’, AFSA website.
[20]. Bankruptcy
Act, section 185M.
[21]. V
Chen, L O’Brien and I Ramsay, ‘An
evaluation of debt agreements in Australia’, Monash University Law
Review (forthcoming), 44(1), 2018; Consumer Action Law Centre, Submission
to Treasury, National Innovation and Science Agenda – Improving bankruptcy
and insolvency laws, 27 May 2016.
[22]. Chen,
O’Brien and Ramsay, ‘An
evaluation of debt agreements in Australia’, op. cit.
[23]. Credit
licences are issued in accordance with Part 2-2 of Chapter 2 of the National Consumer
Credit Protection Act 2009; an Australian Financial Services Licence is
issued in accordance with Division 4 of Part 7.6 of the Corporations Act
2001.
[24]. AFSA,
‘Inspector-General
Practice Statement 4 – Guidelines and processes for registration of debt
agreement administrators’, AFSA website, last updated August 2013.
[25]. AFSA,
‘Inspector-General
Practice Statement 2 – Regulation of bankruptcy trustees and debt agreement
administrators in Australia’, AFSA website, last updated February 2017.
[26]. AFSA,
Personal
insolvency practitioners compliance report 2016–17, AFSA, Canberra, p.
11.
[27]. General
consumer law prohibitions against misleading and deceptive and unconscionable
conduct apply to the extent that the conduct relates to ‘financial services’ as
set out in the Australian
Securities and Investments Commission Act 2001 or to goods and
non-financial services as set out in the Competition and
Consumer Act 2010.
[28]. Bankruptcy
Act, section 12 sets out the functions of the Inspector-General.
[29]. AFSA,
Personal
Insolvency Practitioners Compliance Report 2016-17, op. cit., pp.
14–15.
[30]. AFSA
proactively monitors RDAA compliance to ensure misleading or unbalanced content
is corrected, removed and/or referred to the Australian Securities and
Investments Commission (ASIC) for investigation. In 2016–17, ten registered
debt agreement administrators were deemed to have advertisements in breach of
the guidelines that required remedial action. AFSA, ‘Inspector-General
Practice Guideline 1 – Guidelines relating to advertising and marketing of debt
agreements’, AFSA website, last updated July 2016.
[31]. P
Ali, L O’Brien and I Ramsay, ‘Perspectives
of financial counsellors and consumer solicitors on personal insolvency’,
15 September 2015, p. 1.
[32]. Ibid.,
p. 11.
[33]. Explanatory
Memorandum, Bankruptcy Legislation Amendment Bill 1996, p. 16.
[34]. Ali,
O’Brien and Ramsay, ‘Perspectives
of financial counsellors and consumer solicitors on personal insolvency, op.
cit., p. 11.
[35]. M
Dreyfus, ‘Second
reading debate: Bankruptcy Amendment (Debt Agreement Reform) Bill 2018’,
House of Representatives, Debates, (proof), 28 February 2018, pp. 31–2.
[36]. Ibid.,
p. 32.
[37]. M
Turnbull (Prime Minister) and Christopher Pyne (Minister for Industry,
Innovation and Science), National
Innovation and Science Agenda, media release, 7 December 2015.
[38]. The
Treasury, National
Innovation and Science Agenda – Improving bankruptcy and insolvency laws,
Consultation, 29 April 2016 – 26 May 2016.
[39]. Financial
Rights Legal Centre, Submission
to Treasury, National Innovation and Science Agenda – Improving bankruptcy
and insolvency laws, May 2016, p. 9.
[40]. Ibid.,
pp. 9–10.
[41]. Ibid.,
p. 13.
[42]. Consumer
Action Law Centre, Submission
to Treasury, National Innovation and Science Agenda – Improving bankruptcy
and insolvency laws, 27 May 2016.
[43]. Australian
Securities and Investments Commission (ASIC), Paying
to get out of debt or clear your record: the promise of debt management firms,
January 2016.
[44]. Personal
Insolvency Professionals Association (PIPA), Submission
to Senate Legal and Constitutional Affairs Committee, Inquiry into
Bankruptcy Amendment (Debt Agreement Reform Bill) 2018, 16 February 2018,
p. 2.
[45]. Ibid.,
p. 3.
[46]. Ibid.,
p. 4.
[47]. Ibid.
[48]. Australian
Restructuring Insolvency and Turnaround Association (ARITA), Submission
to the Senate Legal and Constitutional Affairs Committee, Inquiry into
Bankruptcy Amendment (Debt Agreement Reform Bill) 2018, 16 February 2018,
p. 1.
[49]. Ibid.,
paragraph 2.2, p. 7.
[50]. Ibid.,
paragraph 2.3, p. 7.
[51]. Ibid.,
p. 8.
[52]. Australian
Banker’s Association (ABA), Submission
to the Senate Legal and Constitutional Affairs Committee, Inquiry into
Bankruptcy Amendment (Debt Agreement Reform Bill) 2018, 16 February 2018, pp.
1–2.
[53]. Ibid.
[54]. Institute
of Public Accountants, Submission
to the Senate Legal and Constitutional Affairs Committee, Inquiry into
Bankruptcy Amendment (Debt Agreement Reform Bill) 2018, February 2018, pp.
1–2.
[55]. Ibid.,
p. 3.
[56]. Ibid.,
p. 4.
[57]. C
Symes, Submission
to the Senate Legal and Constitutional Affairs Committee, Inquiry into
Bankruptcy Amendment (Debt Agreement Reform Bill) 2018, 16 February 2018,
pp. 1–2.
[58]. Ibid.,
p. 2.
[59]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 2.
[60]. The
Statement of Compatibility with Human Rights can be found at pages 4–7 of the Explanatory
Memorandum to the Bill.
[61]. Item
4 of Part 1 in Schedule 1 to the Bill.
[62]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 13.
[63]. Bankruptcy
Act, proposed subsection 185C(3B).
[64]. Bankruptcy
Act, proposed subsection 185LA(2).
[65]. Bankruptcy
Act, paragraph 185C(4)(c). Under subsection 185C(5) of the
Bankruptcy Act, the threshold amount in relation to a
particular time, means seven times the amount that, at that time, is specified
in column 3, item 2, Table B, point 1064-B1, Pension Rate Calculator A, in the Social Security Act
1991.
[66]. AFSA,
‘Indexed
amounts’, AFSA website.
[67]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 14.
[68]. Bankruptcy
Act, subsection 185C(2D).
[69]. Bankruptcy
Act, proposed paragraph 185C(4)(e).
[70]. Bankruptcy
Act, proposed subsection 185C(4B).
[71]. Bankruptcy
Act, proposed subsection 185E(2AB).
[72]. For
example, Bankruptcy Act, section 139F and section 139T.
[73]. This
is the person specified under proposed paragraph 185C(2)(c) as amended
by item 1 of Part 1 in Schedule 1 to the Bill.
[74]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 17.
[75]. Bankruptcy
Act, proposed paragraphs 185C(2D)(f) and 185C(2D)(g).
[76]. Bankruptcy
Act, proposed subparagraph 185EA(2)(a)(iii). Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 18.
[77]. Bankruptcy
Act, proposed subsection 185EA(4).
[78]. Bankruptcy
Act, proposed subsection 185EC(1A).
[79]. Bankruptcy
Act, proposed subsection 185EC(6). Under subparagraph 185C(2)(d)(i),
a debt agreement proposal must provide that all provable debts in relation to
the agreement rank equally.
[80]. Crimes Act 1914, subsection 4B(2) provides
that where a natural person is convicted of an offence against a law of the
Commonwealth punishable by imprisonment only, the court may, if the contrary
intention does not appear and the court thinks it appropriate in all the
circumstances of the case, impose, instead of, or in addition to, a penalty of
imprisonment, a pecuniary penalty not exceeding the number of penalty units
calculated using the formula: term of imprisonment x 5 where: Term of
Imprisonment is the maximum term of imprisonment, expressed in months,
by which the offence is punishable.
[81]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 21.
[82]. Ibid.,
paragraph 122.
[83]. Bankruptcy
Act, proposed subsection 185M(1D).
[84]. Item
20, Part 4, Schedule 1.
[85]. Item
21, Part 4, Schedule 1.
[86]. Item
1, Part 1, Schedule 2.
[87]. Bankruptcy
Act, subsection 185C(2D).
[88]. Bankruptcy
Act, proposed subsection 185M(2A).
[89]. Bankruptcy
Act, proposed subsection 185M(2B).
[90]. Bankruptcy
Act, proposed subsection 185M(2C).
[91]. Bankruptcy
Act, proposed paragraph 185MA(4)(a).
[92]. Bankruptcy
Act, proposed paragraph 185MA(4)(b).
[93]. Bankruptcy
Act, proposed subsection 185MA(5).
[94]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 28.
[95]. Bankruptcy
Act, proposed subsection 185MC(6).
[96]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 28.
[97]. Bankruptcy
Act, proposed subsections 185PA(4), 185PA(5), 185PC(1A) and 185PC(1B).
[98]. Bankruptcy
Act, proposed subsection 185PC(6).
[99]. Bankruptcy
Act, subsection 185Q(4).
[100]. Bankruptcy
Act, proposed paragraph 185Q(4)(ba).
[101]. Bankruptcy
Act, subsection 185T(2).
[102]. Bankruptcy
Act, subsection 185U(1).
[103]. Bankruptcy
Act, subsections 185U(5) and (6).
[104]. Bankruptcy
Act, proposed paragraphs 185T(2)(c)–(e).
[105]. Bankruptcy
Act, paragraphs 19(1)(h) and (i).
[106]. Bankruptcy
Act, proposed paragraphs 185LA(1)(d) and (e).
[107]. Bankruptcy
Act, proposed paragraph 185LB(3)(c).
[108]. Bankruptcy
Act, Schedule 2, paragraph 1-1(2)(a).
[109]. Bankruptcy
Act, Schedule 2, subsection 65-25(1).
[110]. The
imposition of strict liability means that a fault element does not need to be
satisfied, but the offence will not criminalise honest errors and a person
cannot be held liable if he, or she, had an honest and reasonable belief that
they were complying with relevant obligations. Under section 4AA of the Crimes Act 1914,
a penalty unit is equivalent to $210. This means the maximum penalty is
$10,500.
[111]. Bankruptcy
Act, proposed section 185LDA.
[112]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 34.
[113]. Bankruptcy
Act, Schedule 2, section 70-10.
[114]. Bankruptcy
Act, proposed subsection 185LE(1A).
[115]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 36.
[116]. Bankruptcy
Act, Schedule 2, paragraph 70-5(3)(b).
[117]. Bankruptcy
Act, Schedule 2, paragraph 20-20(4)(b).
[118]. Bankruptcy
Act, proposed section 185A.
[119]. Bankruptcy
Act, Schedule 2, section 25-1.
[120]. Bankruptcy
Act, Schedule 2, section 20-20.
[121]. Bankruptcy
Act, proposed subsection 186C(1A).
[122]. Bankruptcy
Act, proposed subsection 186C(1).
[123]. Bankruptcy
Act, proposed paragraph 186C(2)(f).
[124]. Bankruptcy
Act, proposed paragraph 186C(2)(g).
[125]. Bankruptcy
Act, Schedule 2, subsection 20‑20(4).
[126]. Bankruptcy
Act, proposed paragraphs 186C(4)(e)–(g).
[127]. Bankruptcy
Act, subsection 186C(3).
[128]. Bankruptcy
Act, Schedule 2, paragraph 20-75(1)(e).
[129]. Bankruptcy
Act, proposed subsections 186F(3) and 186G(2A).
[130]. Bankruptcy
Act, proposed subsections 186F(4) and 186G(2B).
[131]. This
is consistent with item 19 of Part 4, Schedule 1.
[132]. Bankruptcy
Act, proposed subsection 186H(1A).
[133]. This
means the maximum penalty is $210,000.
[134]. Bankruptcy
Act, Schedule 2, section 25-1.
[135]. Bankruptcy
Act, proposed paragraphs 186K(3)(e) and (f) (for individuals) and proposed
paragraphs 186L(3)(d)–(f) (for companies).
[136]. A
reasonable suspicion is a suspicion based on facts which,
objectively seen, are sufficient to give rise to an apprehension of the
suspected matter. Suspicion carries less conviction than belief. To say that a
suspicion is reasonable does not necessarily imply that it is well-founded or
that the grounds for suspicion must be factually accurate. Source: Butterworths
Concise Australian Legal Dictionary, 3rd edition, LexisNexis
Butterworths, Australia, 2004, p.365.
[137]. Explanatory
Memorandum, Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, p. 48.
[138]. Bankruptcy
Act, proposed subsection 20-35(3).
[139]. Bankruptcy
Act, section 153A.
[140]. Bankruptcy
Act, subsections 254(3) and 254(4).
[141]. Bankruptcy
Act, subsection 252A(1).
[142]. Item
2 amends section 252A(5) of the Bankruptcy Act to insert references
to proposed subsections 254(3)–254(9).
[143]. Bankruptcy
Act, paragraph 254(2)(a).
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth
Coat of Arms, and to the extent that copyright subsists in a third party,
this publication, its logo and front page design are licensed under a Creative Commons
Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and
communicate this work in its current form for all non-commercial purposes, as
long as you attribute the work to the author and abide by the other licence
terms. The work cannot be adapted or modified in any way. Content from this
publication should be attributed in the following way: Author(s), Title of
publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists
in third party quotes it remains with the original owner and permission may
be required to reuse the material.
Inquiries regarding the licence and
any use of the publication are welcome to webmanager@aph.gov.au.
Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament.
They are produced under time and resource constraints and aim to be available
in time for debate in the Chambers. The views expressed in Bills Digests do
not reflect an official position of the Australian Parliamentary Library, nor
do they constitute professional legal opinion. Bills Digests reflect the
relevant legislation as introduced and do not canvass subsequent amendments
or developments. Other sources should be consulted to determine the official
status of the Bill.
Any concerns or complaints should be
directed to the Parliamentary Librarian. Parliamentary Library staff are
available to discuss the contents of publications with Senators and Members
and their staff. To access this service, clients may contact the author or
the Library’s Central Enquiry Point for referral.