Bankruptcy changes to help Australians struggling with debt

Written by The ReReport
As seen in the Source link, written by on 2020-04-09 06:54:06

A softening of bankruptcy rules will deliver debt relief to Australians suddenly struck by financial problems.

The Federal Government has introduced temporary measures in response to coronavirus-inflicted economic impacts, but debt specialists say struggling borrowers should always contact their lenders first.

The rule changes are available for six months.

They include:

• Increase the minimum amount of debt that can trigger bankruptcy from $5000 to $20,000.

• Raise the amount of time a person has to respond to a bankruptcy notice from 21 days to six months.

• Allow people who submit a temporary debt protection form to have six months of relief from creditors, up from 21 days.

The Bankruptcy Inspector-General and chief executive of the Australian Financial Security Authority (AFSA), Hamish McCormick, said people finding themselves in financial trouble should seek help from a reputable source.

media_cameraAustralians struggling with debt have been given some breathing space by bankruptcy laws.

“You can access advice from a practitioner registered with AFSA, or free support through the National Debt Helpline (on 1800 007 007),” he said.

Mr McCormick said temporary debt protection forms were available on the website.

“While these formal mechanisms are in place to protect those who are struggling, I encourage people to contact their creditors in the first instance,” he said.

“Many large creditors have programs to support individuals and businesses.”

Debt collection group Prushka’s CEO, Roger Mendelson, said the rule changes were a sensible move as there would be “massive numbers” of people facing financial hardship.

“If there is genuine need, creditors from large corporates to SMEs will listen and appreciate contact,” he said.

“Make an offer to pay by instalments, set it up and stick to it. Don’t offer more than you can comfortably pay.

“I suggest that consumers pay SMEs in preference to larger corporates, because they will need the money to operate but large corporates will always be prepared to accept instalment arrangements.”

Mr Mendelson said setting up an instalment arrangement would help prevent potential legal action and a default on your credit file.

“It is important for householders who have never been in this situation before to understand that they aren’t alone and this situation is not their fault,” he said.

“Speak to the lender even if you can currently afford the payments but have concerns about your business or job.

“All major banks have a strategy in place to defer payments for six months but the customer has to ask. The bank won’t approach them.”

Mr Mendelson said insolvency action was likely to grind to a halt at the moment.

“We are only dealing with existing cases at present,” he said.


Originally published as Debt relief to help those hit hard