Explanatory Memorandum
(Circulated by authority of the Attorney-General, the Hon Mark Dreyfus KC MP)GENERAL OUTLINE
1. The Bankruptcy Amendment (Discharge from Bankruptcy) Bill 2023 (the Bill) amends the Bankruptcy Act 1966 (the Act) to regularise and validate the administrative processes of the Australian Financial Security Authority (AFSA), its predecessors and things done, purported to be done, or not done, in reliance on the administrative practice relating to the determination of when a statement of affairs is taken to have been filed for the purposes of a debtor's petition or as required in relation to a sequestration order.
2. The Bill seeks to establish a consistent process for the Official Receiver when assessing a statement of affairs for adequacy while providing legal certainty to debtors, trustees and other parties who may have been affected by previous practice. While the Bill operates retrospectively to validate and regularise decisions, it does not operate retrospectively in relation to past criminal convictions.
3. The Bill makes clear the powers of the Official Receiver to accept, or refuse to accept, a statement of affairs within 14 days of receipt. It also amends section 149 of the Act to clarify that automatic discharge dates from bankruptcy will be linked to when an adequate statement of affairs has been accepted by the Official Receiver. The Bill also amends the Act to ensure that a bankrupt's automatic discharge date under section 149 is consistent with the dates recorded by the Official Receiver in the National Personal Insolvency Index (NPII) prior to commencement in respect to their bankruptcy. It will also ensure that section 149 operates as originally intended, to encourage involuntary bankrupts to provide an adequate statement of their affairs as soon as possible after a sequestration order has been made.
4. An amendment to the Bankruptcy Regulations 2021 (the Regulations) aligns the dates that the Official Receiver is required to enter in the NPII with the amendments to the Act. The Bill aligns the Act with the established practices of the Official Receiver and will validate decisions made in reliance on the dates recorded by the Official Receiver. This will enable AFSA to continue assessing statements of affairs for adequacy, and assisting individuals where required, before 'starting the clock' on a person's period of bankruptcy.
5. Amendments to the Act will also validate decisions made before commencement of the Bill in reliance on dates recorded in the NPII in relation to the filing of a debtor or bankrupt's statement of affairs. The Bill includes a provision that the Commonwealth is liable to pay a reasonable amount of compensation to a person if the operation of the amendments would result in an acquisition of property other than on just terms within the meaning of paragraph 51(xxxi) of the Constitution.
6. In making the above prospective and retrospective amendments, the Bill does not extend or shorten the length of a person's bankruptcy, it confirms their position as advised on entry into bankruptcy and to which they were acting in reliance on.
7. The amendments in the Bill are necessary to provide legal certainty for all parties that engage with the bankruptcy system and who have acted in reliance on the dates contained within the NPII.
Background
8. For a person to apply to enter into bankruptcy voluntarily, they must file a statement of affairs with their debtor's petition. This document outlines a person's financial circumstances and is used to determine eligibility for bankruptcy. Persons who become involuntarily bankrupt through court order must also file a statement of affairs. The information provided within these statements enables the trustee to effectively administer the bankrupt person's estate during the period of their bankruptcy.
9. Under section 149 of the 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 who become bankrupt involuntarily to file their statement of affairs.
10. It has been the long-standing practice of AFSA, 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 filed or 'presented'. This practice is designed to support debtors 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. The same approach has been taken where someone becomes bankrupt involuntarily. This assistance is provided in order to provide a statement of affairs that is adequate for the purposes of administering the person's estate under bankruptcy. In these cases, a delay may occur between filing and acceptance to ensure a statement of affairs is adequate for the purposes of administering the estate.
11. As a consequence of this practice, the date that is recorded on the NPII and treated as the 'filing date' of a statement of affairs for the purpose of section 149 is, in some cases, later than the date that the statement of affairs was first provided to the Official Receiver. This means that the date taken to be the 'filing date' by AFSA and that starts the clock on a person's bankruptcy period, does not align with the ordinary meaning of when something has been 'filed'.
FINANCIAL IMPACT
1. This Bill has no financial impact.