The Federal Parliament is considering the features of the Bankruptcy Amendment (Enterprise Incentives) Bill, which proposes, amongst other things, to reduce the period of bankruptcy from three years to one year.

Understandably, there is still a negative stigma associated with the concept of bankruptcy, despite it being more common that you would think. However the bill is aiming to foster a higher degree of innovation and entrepreneurialism with individuals in business.

In other words, the bill is trying to encourage people to take more calculated risks and to grow industries and the greater economy.

Undischarged bankrupts are faced with a number of restrictions during their term of bankruptcy, such as:

  • International travel restrictions
  • The inability to hold directorships during bankruptcy
  • Disqualifications from certain industry and professional memberships
  • Bankruptcy disclosure obligations when obtaining credit over a certain threshold
  • The loss of property acquired during the term of bankruptcy

Features of the proposed changes:

  • A bankrupt will still be liable to make income contributions (if applicable) for two years after being discharged
  • A Trustee in Bankruptcy will still have the right to object to bankrupt’s discharge, which means the bankruptcy term can still be extended

Advantages of the proposed changes:

  • For the individual, the idea of a ‘fresh start’ is a lot closer to being reality as a result of the reduced bankruptcy term
  • Reduced connotations of failure

Disadvantages of the proposed changes:

  • The lesser bankruptcy term could be misused by individuals with a large appetite for risk
  • There would be fewer Personal Insolvency Agreements (PIAs), as debtors would simply take the one year bankruptcy term on the chin
  • In our experience, the majority of individuals we meet have consumer or property related debts, not business related debts, therefore we are not sure how influential the proposed changes will be for increased entrepreneurship

So when might it come in?

The matter is still a work in progress for Federal Parliament and with the federal election only a short time away, we are not sure if it will get through before voters go to the polls.

Once the new laws are accepted, bankrupt individuals will be discharged if they have served greater than one year (on the basis they are not subject to a notice of objection from their Trustee).

We will keep you posted on how this matter plays out. It will certainly be interesting once (if) the laws come in.

About the author

Greg Quin is a Director at HLB Mann Judd Insolvency WA and has been with the team for 10 years. Greg oversees the daily operations of the many insolvency appointments managed by the team and looks after the operations of the practice.

If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to


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