New procedures for bankruptcies are in force, and they make it easier for debtors to avoid paying up.
The main change came into force on 3 December 2007 and brought in an alternative to bankruptcy. The “no asset” procedure will be filed with and administered by the Official Assignee. The Official Assignee becomes a “one-stop shop” for debtors contemplating bankruptcy.
Debtors contemplating voluntary bankruptcy will be required to complete and submit detailed information about their financial affairs in a “statement of affairs”.
The Official Assignee will use the information contained in the statement of affairs to determine eligibility for entry to bankruptcy or one of the alternatives.
The Official Assignee will do a preliminary investigation to confirm the accuracy of the information provided, and once satisfied with the statement of affairs, may accept the debtor’s application, and adjudicate them bankrupt.
A bankruptcy initiated by a creditor will still be commenced through the High Court.
Another change is that a bankrupt will be eligible for an automatic discharge from bankruptcy after three years irrespective of whether bankruptcy was initiated by the debtor or by a creditor.
No Asset Procedure (NAP)
The No Asset Procedure (NAP) provides debtors with a once in a lifetime relief from their debts, and gives them the opportunity to rejoin, and make a positive contribution to, the economic community after 12 months.
This is an alternative to bankruptcy, and to qualify a debtor has to show that they have:
- No realisable assets
- Not previously been in NAP
- Not previously been bankrupt
- A debt of less than $40,000.00 (excluding student loan and fines)
- No means of repaying the debt
The NAP will usually be used for consumer type debt (credit cards, personal loans, hire purchase).
Summary Installment Orders
The summary installment scheme is in an order, made by a Judge that allows people in debt to pay back money owing in regular, easy stages. The threat of further action is lifted while the order is in force.
All applications for a summary installment order will be received, processed and administered by the Official Assignee (previously District Court).
The main changes are: