Canberra Plans To Raise Bankruptcy Threshold

There are new proposed laws that will mean that creditors will have to wait 28 days before taking action to recover debt.

Canberra plans to raise the bankruptcy threshold from $2,000 to $10,000 and banks are against this, as they feel it will only encourage Australians to run up bad debts.

The Australian has reported that a senate committee is looking into the Rudd governments' bankruptcy reforms which will prevent creditors petitioning for bankruptcy until they are owed $10,000.

These new laws will also mean that creditors will have to wait 28 days before they can take action to recover debt.

The Australian Bankers Association has informed the senate inquiry that the threshold should be set at $5,000 as opposed to $10,000.

Small businesses feel that they will be disadvantaged by these new laws as debts owed to them are normally smaller amounts.

It is felt that with this change debtors will not see the urgency to repay the debt as it is unlikely to result in bankruptcy. With these new laws a body corporate could wait years before filling a bankruptcy claim against an apartment owner who had not paid strata fees. By having a $10,000 threshold debtors could run up debts and incur interest without the creditor being able to file for bankruptcy.

The ABA also felt that the 28 day stay period was too long for creditors to wait before being able to take action against a debtor who filed for bankruptcy.

Published on January 1-th, 2010 in Financial Planning
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.