How Long Does Bankruptcy Last? Changes To Bankruptcy Laws Australia.
The Bankruptcy Amendment Bill —1 Year Discharge Period
Due to an initiative driven by National Innovation & Science Agenda, the bankruptcy amendment will reduce the term of bankruptcy from three years to one year. This period of discharge will be set from the date that the statement of affairs is filed in order to claim bankruptcy. The bill reserves the right of the Trustee to extend the length of the term in cases of misconduct.
Why Do They Want To Shorten The Term Of Bankruptcy?
The shorter term is intended to encourage entrepreneurship and remove the stigma that is associated with bankruptcy. It acts to support those taking risks in growth areas and recognises most entrepreneurs will fail at least once before being successful.
Economically, the initiative hopes that business owners attempting to ‘make up their losses’ in a failing business will call it quits before accruing more debt with creditors, and potentially damaging opportunities for other small business expecting payment from a company that is running insolvently.
In addition, the change will create a reduction in administrative costs for Trustees and the Government in overseeing bankruptcy matters.
Pros and Cons of The Proposed Changes To Bankruptcy Laws:
AKA: Who benefits from the change?
- No need to disclose bankruptcy status beyond the 12-month period when applying for credit.
- No need to seek permission to travel overseas.
- Able to act as a company director after the one-year period.
- Property acquired by an undischarged bankrupt automatically vests in their Trustee.
- Some limitations with regards to business and professional memberships.
AKA: No change.
Income contributions will continue for another two years, as per the original term and can be extended in the case of non-compliance.
CHeck out the income threshold stipulations in out FAQ section.
When Will The New Law Take Place?
The one-year bankruptcy discharge will commence six months after the Bill receives Royal Assent. This is to allow trustees the time to prepare for the change and assess their individual cases to deem appropriate.
Will The One-Year Discharge Term Be Retrospective (AKA- If I’m bankrupt, does the new law apply to me?)
Yes. Although, bankruptcies will be looked at on a case-by-case basis—the one-year term applies to those already bankrupt, considering they have already been bankrupt for at least a twelve month period. If there have been past objections to discharge, or in cases where the term has been extended, the case will remain unchanged.
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