Bankruptcy Amendment (Debt Agreement Reform) Act 2018
The Bankruptcy Amendment (Debt Agreement Reform) Act 2018 received royal assent on 27 September 2018. The majority of the amendments commenced on 27 June 2019. These reforms improved industry standards by setting enhanced registration and practice requirements, introduced tougher penalties for wrongdoing and granted the Inspector-General in Bankruptcy additional investigative powers to address administrator misconduct.
The final tranche of these reforms commenced on 27 September 2019. It required all debt agreements made under the Bankruptcy Act 1966 (Bankruptcy Act) to be administered by a registered debt agreement administrator (or the Official Trustee).
Coronavirus Economic Response Package Omnibus Act 2020
The Coronavirus Economic Response Package Omnibus Act 2020 delivers temporary relief to financially distressed individuals and businesses in response to the COVID-19 pandemic.
The Act provides for monetary thresholds and time periods currently set out in the Bankruptcy Act to be changed by regulation. These amendments commenced on 25 March 2020. The amendments apply to:
- bankruptcy notices issued on or after 25 March 2020
- petitions and declarations presented on or after 25 March 2020.
The relief measures were originally in force until 24 September 2020, but were extended by the Australian Government until 31 December 2020.
The first set of amendments permit regulations to set the statutory minimum (a new defined term)—the amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings against a debtor. Previously, the Bankruptcy Act provided the amount of $5,000. Regulations set a temporary minimum of $20,000.
The second set of amendments permit regulations to set the statutory period (a new defined term)—the period that debtors have to respond to a bankruptcy notice. Previously, the time allowed for payment was set out in the prescribed form in the Bankruptcy Regulations 1996, which stated 21 days unless extended. Regulations extended this period to 6 months.
The third set of amendments permit regulations to set the default period (a new defined term)—the period during which a debtor is protected from enforcement action by a creditor following presentation by the debtor of a declaration of intention to present a debtor’s petition. Previously, the Bankruptcy Act provided the protection period to be 21 days. Regulations extended this period to 6 months.
Bankruptcy Regulations 1996
As noted above, amendments to the Bankruptcy Act allowed the Bankruptcy Regulations 1996 to prescribe temporary increases to the statutory minimum and statutory period. The definition of statutory minimum in the Bankruptcy Act was prescribed as $20,000, while the definition of statutory period was prescribed as 6 months.
Regulation 4.02AA provides that both the temporary increase to the statutory minimum and statutory period are to be repealed at the end of the period of 6 months starting on 25 March 2020. This period has now been extended to 31 December 2020.