The Bankruptcy Amendment Bill is Moving Up

The Bankruptcy Amendment (Discharge from Bankruptcy) Bill 2023 (“Bill”) has been agreed to by both the House of Representative and the Senate and will now be presented to the Governor-General.

The Bill seeks to amend the Bankruptcy Act 1966 (Cth) (“the Act”) to provide legal certainty on the calculation of bankruptcy discharge dates, aligning the Act with current practices, by confirming that the discharge date is determined from when the Statement of Affairs is accepted, rather than when it was initially presented.

 

Why the change?

The amendment follows recent bankruptcy cases, such as Docherty v Porter, in the matter of Docherty (Bankrupt) [2021] FCA 1227, which have raised a point of contention regarding the calculation of discharge dates for bankrupts.  The cases uncovered that there was a disparity between the Australian Financial Security Authority (“AFSA”) administrative process associated with the lodgment of a key bankruptcy document, the Statement of Affairs (“SOA”), and the process outlined in the Bankruptcy Act.

Under the Act, a person becomes discharged from bankruptcy three years and one day after their SOA is filed. However, the practice of AFSA (since 1992) is to link the filing date of a SOA to when it was accepted, rather than initially presented. Therefore, when the filing date of the document is different to the date that AFSA accepts the document, a conflict arises over the correct date for the individual’s discharge from bankruptcy.

 

The changes

The Bill seeks to address this point of contention by confirming that the filing date of a SOA is the date on which the document is accepted, rather than the date that it is initially presented by the individual. These changes validate current the practices of AFSA and should therefore not affect any former or current discharge dates.

The Explanatory Memorandum proposes inter alia the following:

1. The Bill amends the Act to regularise and validate the administrative process of AFSA relating to the determination of when a SOA is taken to have been filed.
2. The Bill tries to create a consistent process for the Official Receiver when assessing a SOA for satisfactoriness, whilst also providing some clarity to debtors and other parties as to what the expectations are.
3. The Bill confirms the powers of the Official Receiver to accept or refuse a SOA within 14 days of being provided with it.
4. The Bill further provides some clarity about automatic discharge dates from bankruptcy and that they will be linked to when a satisfactory SOA has been accepted by the Official Receiver.
5. The Bill will also urge involuntary bankrupts to provide a satisfactory SOA as soon as possible after a sequestration order has been made to bankrupt them.

 

What does the change mean?

Once passed, these amendments will confirm AFSA’s longstanding practice and position, and it will operate retrospectively to validate and regularise decisions (except in relation to past criminal convictions). The Bill will also provide legal certainty for all parties that engage with the bankruptcy system and who have acted in reliance on the dates contained within the National Personal Insolvency Index.

If you have any questions relating to the bankruptcy process and dealing with AFSA, please contact Mr Stipe Vuleta or Ms Sayward McKeown of our office.

This article was prepared with the assistance of Claire Smith.