The federal government has unveiled changes to bankruptcy laws for householders suffering mortgage stress.
Under the proposed changes, the minimum debt for which a creditor can petition for bankruptcy will rise from $2,000 to $10,000 while the stay period from filing a debtor’s petition to when creditors get their hands on assets would go from seven days to 28.
The amendments come as bad debts soar and personal insolvencies hit record levels thanks to the ongoing effects of the global financial crisis.
According to a report in The Australian Financial Review, attorney general Robert McClelland, who will release the draft legislation later today, is determined to make good on his promise to release people from bankruptcy after one year – a suggestion that has been fiercely opposed by banks and non-bank lenders.
Lenders want the current three year period retained as they believe being released from income contributions after one year would make bankruptcy a more attractive way to escape debts.