Mark Dreyfus (Isaacs, Australian Labor Party, Cabinet Secretary) Share this | Hansard source

I move:

That this bill be now read a second time.

The Bankruptcy Amendment (Discharge from Bankruptcy) Bill will amend the Bankruptcy Act 1966 to clarify when a person will be automatically discharged from bankruptcy.

The bill amends the legislation to accurately reflect the way automatic bankruptcy discharge dates have been calculated by the Australian Financial Security Authority and its predecessors for over thirty years, and will apply both prospectively and retrospectively. This will provide certainty to individuals who apply for bankruptcy or have become bankrupt, creditors and trustees.

The bill affirms longstanding practice and common understanding of the way the provisions of the legislation have been historically applied. Upon passage of this legislation, the government will take steps to notify all affected parties so they are aware of these measures.

Statement of affairs and automatic discharge from bankruptcy

For a person to apply to enter into bankruptcy voluntarily, they must file a statement of affairs. This document outlines a person's financial circumstances and is used to determine eligibility for bankruptcy. Persons who become involuntarily bankrupt through a sequestration order made by the court must also file a statement of affairs. The information provided enables the trustee to effectively administer the bankrupt person's estate during the period of their bankruptcy.

Under section 149 of the Bankruptcy Act, a person becomes discharged from bankruptcy three years and one day after their statement of affairs is filed. The filing of a statement of affairs essentially commences a person's period of bankruptcy. This provision was inserted in the act in 1991 and was intended to encourage those subject to a sequestration order following a creditor's petition to file their statement of affairs.

Established practices of the official receiver

In practice, individuals often need assistance from the Australian Financial Security Authority, in its capacity as the official receiver, in order to provide a statement of affairs that is adequate for the purposes of administering the person's estate under bankruptcy.

It has been the longstanding practice of the Australian Financial Security Authority, and its predecessors, to record a bankruptcy applicant's statement of affairs as having been filed on the date it is accepted, rather than the date it was initially 'presented' or provided. This practice is designed to support vulnerable people by minimising the risk of an application for bankruptcy being rejected. The process allows bankruptcy applications to be assessed for completeness and, if required, applicants to be supported to identify and obtain missing information. Where a statement of affairs is adequate, it is accepted on the day it is provided, however where it is not, the acceptance date may be later. The same approach has been taken where someone becomes bankrupt involuntarily.

Amendments to align the act with current practice

The bill will amend the act to enable the Australian Financial Security Authority to continue its practice of assessing bankruptcy applications for adequacy before the period of a person's bankruptcy commences.

New provisions will be inserted into the act to require the official receiver to either accept, or refuse to accept, a statement of affairs within 14 days of receiving it. This will ensure that decisions are made within a reasonable time, and provide greater certainty to individuals who apply for bankruptcy or have become bankrupt involuntarily.

Validation of discharge dates and decisions

The bill includes amendments to ensure that the bankruptcy period of those who are, or have been, bankrupt is consistent with the dates recorded by the Official Receiver prior to commencement in respect to the bankruptcy. This will validate decisions made before commencement of the bill in reliance on those dates. This will allow bankrupted persons, the trustees of their estates, and other entities who rely on the dates within the National Personal Insolvency Index, to be assured that the discharge dates of existing bankruptcies are not being changed.

However, the validation of things done before commencement does not apply to criminal proceedings. This is to ensure that, if a person believes they were wrongfully convicted of a crime due to a mistaken understanding that they were bankrupt at a particular time, the bill will not restrict their ability to challenge their conviction.

Conclusion

It is essential that there be certainty in the bankruptcy system. The amendments in the bill will provide certainty to individuals and industry by affirming a longstanding practice and common understanding of the application of the legislation.

I commend the bill to the House.

Debate adjourned.

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