Australians who fall on hard times may soon be eligible for greater protection under the nation’s personal bankruptcy laws.

The Attorney-General, Robert McClelland has just announced proposed changes to those laws.

“Increasingly, bankruptcies tend to involve people who have simply fallen on hard times rather than unscrupulous debtors trying to avoid paying their debts,” Mr McClelland said.

He was speaking as he  released the Government’s proposed reforms to Australia’s personal bankruptcy laws for public consultation.

Mr McClelland said the Bankruptcy Legislation Amendment Bill 2009,  is meant to modernise personal insolvency arrangements.

He said it would do this by recognising that the majority of bankruptcies relate to consumer debts and involve people with relatively few assets and little income.

In a statement accompanying his announcement, Mr McClelland also said the proposed changes would give hard-pressed Australians a more realistic opportunity to consider their options, reorganise their affairs and where possible, avoid bankruptcy, by:-

• increasing the minimum debt for which a creditor can petition for bankruptcy from $2,000 to $10,000
• increasing the stay period from when a declaration of intent to file a debtor’s petition is filed to when a creditor may commence action to recover debts from seven to 28 days and
• increasing the income, asset and debt thresholds to allow more people in financial distress to enter into voluntary debt agreements.

He said though that the draft bill  also proposes to strengthen the penalties for some offences, particularly those involving fraud.

This would appropriately reflect the seriousness of the conduct and ensure the penalties align with similar offences in other Commonwealth, State and Territory legislation, Mr McClelland said.

It also strengthens powers for the Inspector-General in Bankruptcy to investigate possible offences.

“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,” he added in the statement

“These reforms aim to ensure those in financial difficulty have the opportunity and the ability to obtain advice and information about their options and possible alternative solutions before entering bankruptcy.”

He said the draft Bill would be open for public comment until  September 14.

The draft Bill and accompanying Explanatory Memorandum are available on the Attorney-General’s Department website at http://www.ag.gov.au/.