The Attorney-General’s Department is considering changes to Australia’s bankruptcy regime and the impacts of the COVID-19 pandemic.
ARITA recently sought feedback from its members regarding the proposed changes, including the reduction of the default bankruptcy period to one year, as initially proposed by the Bankruptcy Amendment (Enterprise Incentives) Bill 2017.
Mills Oakley recently provided a short submission paper to ARITA addressing the pertinent issues. Our submission warns that now especially is not the time to legislate a one-year discharge from bankruptcy, as the concessions granted under the omnibus reforms together with the prospect of a one-year bankruptcy opens up space for abuse by individuals and sole traders. Instead, our submission proposes that the default three-year bankruptcy remains, with the possibility of discharge after one-year for ‘good’ bankrupts. This ‘parole’ opportunity would not be available in any subsequent bankruptcy, thereby mitigating the risk for phoenix-like activity in bankruptcies and incentivising bankrupts to comply with their statutory requirements under the Bankruptcy Act 1966 (Cth).
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