By Jeff Brown a Principal of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
Proposed amendments to the Bankruptcy Act 1966 which would reduce the duration of a typical bankruptcy from three years to one year have been drafted, and it is a matter of when – not if – the amendments will become law throughout Australia.
The reduction is partly to ensure that bankruptcy does not act as too much of a handbrake on the entrepreneurial spirit. Business owners should be able to fail once, twice or even more, before succeeding.
That is all well and good, unless of course you are one of the unpaid creditors left in the wake of a failed business venture.
As all of us in business (including me) know, debt collection is difficult enough at present. When a customer goes bad, one of the few methods to get yourself at the front of the creditors queue is to show that you would be willing to make the debtor bankrupt if they will not pay. In future, bankruptcy will be less of a practical burden on debtors, and there will probably be less stigma attached to having been a bankrupt person.