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Bankruptcy reform: a vaccine for the economy?

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

Countries around the world have commenced their vaccine programs, with Australia’s vaccine expected to commence imminently once the TGA completes its approval process. As to the economic impacts of COVID-19, the Australian Government has been testing its own form of vaccine through legislative changes to corporate insolvency and bankruptcy laws.

In March 2020, the Australian Government enacted a number of changes to corporate insolvency and bankruptcy laws, seeking to address the economic impact of the coronavirus. The significant changes to bankruptcy laws included:

  1. An increase in the cap on issuing bankruptcy notices from $5,000 to $20,000; and
  2. An increase in the period for compliance with a bankruptcy notice from 21 days to 6 months.

Both of these changes were made by providing definitions determined through Regulations, which means that they are able to be adjusted from time to time by the Executive. Previously those amounts were hard-coded in the Bankruptcy Act and could only be changed through Parliament.
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Draft Bankruptcy Regulations 2021

By Ellen Ferris, a Solicitor in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

On 3 December 2020, the Exposure Draft of the Bankruptcy Regulations 2021 was released for consultation.  These regulations are an updated version of the Bankruptcy Regulations 1996, and the draft copy can be found here.

The consultation period expires on 10 January 2021, and the Bankruptcy Regulations 1996 are due to sunset on 1 April 2021. Submissions can be submitted by email to Bankruptcy@ag.gov.au

Main changes

As the existing Regulations were drafted in 1996, the Attorney-General’s Department have proposed a number of drafting changes to bring the Regulations up to date. This includes minor technical amendments to remove redundant or outdated references to legislative schemes which have been repealed, and modifying references to “the Official receiver” to consistently refer to “an Official receiver”.  Some interesting changes and additions are as follows:

  • The addition of a definition which clarifies the expenses a trustee can be paid for carrying on business under a section 50 order. The definition outlines what can be paid for work done and for expenses incurred.
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The handcuffs are on debt recovery, but for how long? What you can do in the meantime…

By Jeffrey Brown, Principal at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group


As part of the Federal Government’s response to the COVD-19 crisis, a handbrake has effectively been applied to court proceedings aimed at bankrupting individuals and placing companies into liquidation. This has been achieved by lengthening the time for debtors to respond to formal demands, from 21 days to 6 months, for both bankruptcy notices (in the case of individuals) and statutory demands (for payment of debts incurred by companies). As part of the same reforms, the minimum debt amount that can be the subject of bankruptcy or winding up proceedings has been increased to $20,000.00.

The Federal Government intends to keep these extended compliance periods and amounts in place until at least the end of 2020. While they remain in place, debtors will be well aware that creditors have limited options open to them to enforce their debts.

Anecdotal evidence would suggest that many of those debtors are choosing to trade on their businesses well beyond the point at which they have become insolvent (that is, unable to pay their debts as they fall due).
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I don’t owe them money: invoking bankruptcy jurisdiction to ‘look behind a judgment’

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

It is an unfortunate predicament for bankruptcy trustees that they become a new target for the litigious bankrupt. Bankrupts hell-bent on maintaining the original dispute with the petitioning creditor often request bankruptcy courts to ‘look behind the judgment’, an exercise in which a bankruptcy court can determine whether a debt is really owing in substance, notwithstanding that there may be a pre-existing court order.

Such is the saga of the Bankrupt Estate of Shaw, the history of which was set out by Snaden J in Shaw v The Official Trustee in Bankruptcy [2019] FCA 1574 (“the Review Application”), an application by the bankrupt seeking to review the trustee’s decision to admit the petitioning creditors’ debt. The decision in the Review Application has recently been affirmed on appeal in Shaw v The Official Trustee in Bankruptcy [2020] FCAFC 142 (“the Review Appeal”).
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COVID-19: Will my hearing go ahead? – Part 3

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

This is part 3 of our series on what will constitute valid grounds for an adjournment of a pending hearing, due to COVID-19 and the global coronavirus pandemic.

In Talent v Official Trustee in Bankruptcy & Anor (No 5) [2020] ACTSC 64 the Plaintiff sought an adjournment of the trial hearing, arguing that he was an ‘at risk’ person because he suffered from leukaemia. Doctors had recommended that he remain isolated.

Submissions were made about the Plaintiff’s legal team being at risk, as well as the Defendant’s senior counsel withdrawing because she was at risk and could not fly down for the hearing. However, those matters were expressly not considered.

The court did consider that a lot of the hearing could be conducted from a remote location. However, on balance the Court granted the adjournment application, based on the Plaintiff’s right to observe the hearing and the need to provide prompt instructions. The Court drew a distinction between final hearings and other court procedures:
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The “arid technicality” of Bankruptcy Notices?

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

At a high level the process for applying to make someone bankrupt may appear simple and straightforward. But, as the old adage goes, the devil is in the detail. At a granular level, the rules in bankruptcy proceedings are rather technical and procedures must be strictly adhered to. Often enough, a party will make a mistake where the consequence is they must start all over again, adding to lost time and increased costs.

The recent judgment of Metledge v Hopkins [2020] FCA 561 is one such case. The creditor, Ms Metledge, applied to the Federal Court of Australia for a sequestration order against the debtor, Mr Hopkins – that is, an order placing the debtor into bankruptcy and for a trustee to be appointed over his property. The creditor relied on the debtor’s failure to comply with a Bankruptcy Notice.
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Winter is Coming – COVID-19 Changes Insolvency Law

By Anica Cunanan, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

The unprecedented financial impact of COVID-19 has forced the laws surrounding insolvencies to change – well at least temporarily.  Analogous to the process of containing the virus, the Government is currently deciding on temporary changes to also flatten the curve of the inevitable insolvencies following this pandemic.

The Treasurer has been given a temporary instrument-making power in the Corporations Act 2001, for a period of six months, in order to provide temporary relief to distressed businesses. This was announced by the Government on 12 March 2020.

By way of summary these changes may include the following:

  1. A temporary increase in respect of the debt for which creditors may issue a statutory demand – from $2,000 to $20,000;
  2. Further, extension of the time for compliance with a statutory demand – from 21 days to six months;
  3. An increase in the threshold for initiating bankruptcy proceedings;
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DEBTOR’S PETITION OVERHAUL – JANUARY 2020

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

An individual overwhelmed by debt (“the Debtor”) may seek the protection of the Bankruptcy Act 1966 (Cth) (“the Act”) and file a Debtor’s Petition.

Section 55 of the Act provides that an individual may present to the Official Receiver a petition against himself/herself in the approved form and accompanied by a Statement of Affairs which provides details of the person and sets out the person’s financial affairs.

On 1 January 2020 the Official Receiver commenced a new online process for the lodgement of debtor’s petitions in an online portal. A new version of the approved form has been created which combines the petition and the Statement of Affairs.  A sample of the new approved form can be found here.  A Debtor is required to set up an online account to complete the form.  For online access to create an account see here.
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