Attorney-General Robert McClellend said the amendments to the bankruptcy laws recognise that the majority of bankruptcies relate to consumer debts, and involve people with few assets and little income.

Personal insolvency rarely involves “unscrupulous debtors trying to avoid paying their debts”, he said today.

The amendments area bid to give those in financial distress a realistic opportunity to consider their options, reorganise their affairs and avoid bankruptcy, McClelland said.

In the past yearthere was an 11 per cent increase in bankruptcies in Australia. The 2008-09 financial year saw the highest ever level of personal insolvency activity, comprising 36,479 administrations. According to the Attorney, a vast majority of those bankruptcies involved consumer debts.

The new bill increases the current minimum amount to recover debts via bankruptcy from $2,000 to $10,000. Last year, just 20 per cent of bankruptcies related to debts between $2,000 and $10,000.

McClelland said the increase is intended to reflect the increase in the value of money since 1996, when the $2,000 limit was set, but also to reflect the increase in the overall levels of personal debt.

The bill also provides for a 20 per cent increase in the income threshold for debt agreements. The Attorney said the increase will make debt agreements more widely available.

“In recent years debt agreements have become an increasingly popular alternative to bankruptcy. Not only can they be good for debtors but they also can be good for creditors. They provide far superior returns to creditors when compared with bankruptcy,” he said. 

The bill also includes provisions related to offenses. The amendments will help ensure any criminal activity by bankrupts is dealt with appropriately.

McClelland said today the amendments will also help tohighlight the different treatment for bankrupts who engage in criminal activity, compared with those who are just unfortunate.

McClelland said: “The Government is committed to ensuring our bankruptcy laws are able to deal with personal insolvency issues quickly and efficiently so that people can get back on their feet as soon as possible.”