Government Should Leave It Alone!

The government, well more specifically the Attorney Generals Department are having a review into the Debt Agreement System at the moment.  They have these things every so often.   The big news is that there a changes being considered to the bankruptcy act to “encourage” people to do Debt Agreements (a payment arrangement with creditors). The things they’re looking at implement are

• Mandatory Counselling before you can go bankrupt and before you you’re discharged from bankruptcy
• A means test for bankruptcy, if you earn too much to bad
• Raising the amount you have to repay under bankruptcy
• A “junior” or a “mini” bankruptcy for people with no assets and very little debt eg  aged pensioners, disability pensioners, etc. There would be reduced consequences but it would be a one time only deal.

Personally I’ve always admired the fact that Australian Bankruptcy law isn’t punitive.  It’s always been a way for Australians with debt they can’t repay a lifeline.  It wasn’t designed as a punishment. You just can’t get out another debt for 7 years. If you got big assets they’re sold and and given to your creditors as a partial payment.  Doesn’t seem that bad right?  Seems kinda fair.

Very few people deliberately incur debt with the intention of filling for bankruptcy. Maybe 1 person a month out of 25,000 people every year.  Rather than punishing people who file for bankruptcy surely it’s better to reward people who choose to do a debt agreement. My suggestions for encouraging people to do a debt agreement are

• Remove notation on credit history after the debt agreement is finalized

Actually that’s about it.  That’s all you need to do! Almost every single person we talk to wants to pay back their debt. The just need to be able to do it at a rate they can afford.