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In April 2016, the Federal Government released a Proposals Paper, Improving Bankruptcy and Insolvency Laws. This was under the banner of the National Innovation and Science Agenda. The Proposals Paper recommends that there be a reduction in the current default bankruptcy period from 3 years, to 1 year.  This is because, it is suggested, Australia’s entrepreneur’s are being stifled and curtailed in their quest to succeed, by the stigma and longevity of bankruptcy (among other restrictions).

In an article published in Volume 17 Issue 5 of the LexisNexis Insolvency Law Bulletin, Stephen Mullette, a Principal in our Insolvency and Restructuring Group, reviews the logic (or apparent lack thereof) in the arguments for a reduction in the bankruptcy period, as well as some of the implications for trustees in bankruptcy, and for bankrupts, from the proposed reforms.

Given that around 80% of all bankruptcies are not business related, the reduction in the bankruptcy period for all bankruptcies (and not merely the stifled entrepreneurs the Government is seeking to assist) does not make sense. And if we are going to pass legislation that assumes that businesses need to fail before they can succeed, then perhaps one of the reforms the Government could consider would be a disclosure by entrepreneurs to their creditors as to which of their several failures the entrepreneur was embarking upon, so that lenders and suppliers could consider whether to advance further credit.

Read the full article “A Nation of Failures(link is external)“.

If you would like more information or advice in relation to insolvency law, a Principal of the Matthews Folbigg Insolvency and Restructuring Team:

Jeffrey Brown on (02) 9806 7446 or

Stephen Mullette on (02) 9806 7459 or