As many will already be aware, significant amendments to the Bankruptcy Act 1966 (Cth.) (“the Act”) and the Bankruptcy Regulations 1996 (Cth.) (“the Regulations”) have been introduced by the Bankruptcy Legislation Amendment Act 2010 (Cth.) (“the Amendment Act”) and the Bankruptcy Amendment Regulations 2010 (No. 1) (Cth.) (“the Amendment Regulations”).

The most significant of those amendments are summarised below, some of which come into effect tomorrow:

1.     Abolition of Bankruptcy Districts

Bankruptcy districts have now been abolished with the relevant amendments (found in Schedule 3 of the Amendment Act) coming into force on 15 July 2010.

2.     Changes to Bankruptcy Notices and Creditors’ Petitions

From tomorrow, 11 August 2010, a Bankruptcy Notice cannot be issued on the application of a creditor, or a Creditor’s Petition presented to the court, unless a minimum debt of $5,000.00 is owed by the debtor. The minimum debt previously required to support a Bankruptcy Notice or Creditor’s Petition was $2,000.00.

3.     Declarations of Intention to Present a Debtor’s Petition

The stay period that arises when a debtor files a Declaration of Intention to Present a Debtor’s Petition (“Declaration of Intent”) has been extended from 7 days to 21 days (by reason of an amended definition of “stay period” in section 5(1) of the Act).

Pursuant to a new section 54A(2), when presenting a Declaration of Intent to the Official Receiver, the Declaration must be accompanied by a Statement of the Debtor’s Affairs and a copy of that Statement.

Pursuant to a new section 54C(2), if the Official Receiver accepts a debtor’s Declaration of Intent, the Official Receiver must give written notice of the acceptance to each of the creditors disclosed in the debtor’s Statement of Affairs.

These amendments will come into force on 1 October 2010.

4.     Remuneration of Trustees

The process with regard to the determination of a trustee’s remuneration has been revised and the new procedure can be summarised as follows:

1. The trustee will first seek the approval of the creditors pursuant to section 162 of the Act. The statutory minimum amount will be increased from $1,109.00 to $5,000.00 or another amount prescribed by the Regulations (new section 161B(1));
2. If the trustee’s remuneration is not fixed by the creditors or the committee of inspection, the trustee will no longer be remunerated as prescribed by the Regulations. Instead, the trustee will now apply to the Inspector General who will have the responsibility of determining remuneration claims (new section 162(4)) having regard to the matters prescribed by the Regulations.

The new process will be prescribed by the Regulations.

The existing section 167 (“taxation of costs”) is to be removed and replaced with new sections 166 and 167 which relate to “payment to third parties” and “review of remuneration” respectively. Pursuant to section 166, trustees will be required to give notices to the bankrupt and creditors with regard to payments for services made to third parties, as required by the Regulations. The new section 167 provides that the Regulations may make provision for a review process largely conducted by the Inspector General regarding trustees’ remuneration.

These amendments will commence on a date fixed by Proclamation, or if not on 15 January 2011.

5.     Offence provisions

Several amendments have been made to the offence provisions. Practitioners should refer to the individual sections for a more comprehensive understanding of the amendments, however a short summary is provided below:

1. The Inspector General will have increased powers to make inquiries and investigations regarding whether a person has committed an offence, and issue notices requiring production of certain information under a new section 12(2A) which will attract a penalty of 12 months’ imprisonment if not complied with within 14 days;
2. Further and increased penalties are to be imposed. Generally, penalties which previously carried a penalty of 1 penalty unit will now attract a penalty of up to 5 penalty units, and those that carried a penalty of 5 penalty units now attract a penalty of up to 25 penalty units;
3. Some amendments have modified a trustee’s requirement to give certain notices to the Official Receiver “as soon as practicable”, to a requirement to provide those notices within a more certain “2 days” running from the occurrence of a particular event (see for example section 74 (Annulment of Bankruptcy), section 153A(2) (Annulment on payment of debts) and section 153B (Annulment by Court));
4. Some other provisions previously requiring notices to be lodged “immediately” must now be filed “before the end of the period of 2 days” after a certain event. Practitioners should refer to the particular sections in this regard;
5. Trustees should also note the new sections 170A and 185LEA with respect to the lodgement of annual returns.

These amendments will commence on a date fixed by Proclamation, or if not on 15 January 2011.

6. Amendments to the Bankruptcy Regulations 1996

The Amendment Regulations introduce a number of largely technical amendments, the most important of which is a new Bankruptcy Notice form which can be found in Schedule 1 of the Amendment Regulations.

The amendments to the Bankruptcy Regulations including the introduction of the new Bankruptcy Notice form commenced on 1 August 2010.