A proposal to reduce the default bankruptcy period from three years to one year has drawn fire from the Personal Insolvency Professionals Association, which says such a move would "incentivise" bankruptcy.Earlier this month the Government issued a consultation paper, saying that current insolvency law puts too much emphasis on penalising and stigmatising failure, and stifles innovation.Other proposals in the paper included the introduction of safe harbour arrangements for directors that would protect them from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company; and a crackdown on the use of ipso facto clauses, which have the purpose of allowing contracts to be terminated solely due to an insolvency event."Bankruptcy can be a result of necessary risk-taking or misfortune rather than misdeed. The law needs to strike a better balance between encouraging entrepreneurship and protecting creditors," the paper said.Personal Insolvency Professionals Association director Ben Paris said the proposed changes positioned bankruptcy as an "easy escape route" for anyone facing debt and financial stress.Paris said: "Given the high number of Australians in financial stress, these changes will lead to an explosion in the number of consumer related bankruptcies."He said Australia was already experiencing a problem with "phoenixing", where businesses file for bankruptcy to avoid paying their debts and then re-emerge in a new form. During the three-year bankruptcy period restrictions are placed on a bankrupt's ability to travel overseas and incur further debt. There is a prohibition on being a company director and there may be other employment and licensing restrictions.