A Bankruptcy Act amendment that passed both houses of parliament last week will deliver certainty for creditors on the calculation of discharge dates by validating an administrative process of the Australian Financial Security Authority that has created uncertainty for decades.
The new law will operate retrospectively to validate decisions made by AFSA regarding when a statement of affairs was taken to have been filed.
The amendment is designed to provide legal certainty for all parties that engage with the bankruptcy system.
When a person applies to enter into bankruptcy voluntarily, they must file a statement of affairs with their debtor’s petition. The statement of affairs details their financial circumstances and is used to determine their eligibility for bankruptcy. It is also used by the bankruptcy trustee when administering the bankrupt’s estate.
People who become bankrupt involuntarily through a court order must also file a statement of affairs.
Under the Bankruptcy Act, a person is discharged from bankruptcy three years and one day after their statement of affairs is filed.
It is AFSA’s practice (as it was for its predecessor organisations) to record a statement of affairs as having been filed on the date it is accepted, rather than the date it was presented. This allows bankruptcy applications to be assessed and missing information added. In such cases a delay occurs between presentation and acceptance.
AFSA does this to reduce the risk that an application for bankruptcy is rejected because of an incomplete statement of affairs. The practice is also designed to ensure the bankruptcy trustee has a statement that enables it to administer the person’s estate effectively.
As a result, the date that is recorded on the National Personal Insolvency Index and treated as the “filing date” of a statement of affairs is, in some cases, later than the date that the statement of affairs was first provided to the Official Receiver.
This means that the date taken to be the filing date by AFSA that starts the clock on a bankruptcy period may not align with the ordinary meaning of when something has been filed.
The amendment aligns the Bankruptcy Act with AFSA practice, confirming that the filing date of a statement of affairs is the date that it is accepted.