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CCLC comments on the proposed $120 fee for going bankrupt

 Karen Cox and Kat Lane have both been interviewed about the proposed new $120 filing fee that debtors will have to pay in order to go bankrupt.  Consumer groups say the changes will deepen the financial woes of people who can’t afford to pay their debts.

Article 1:

“Federal Government begins charging for bankruptcy applications”  by Pat McGrath at ABC

1 April 2014

ELEANOR HALL: Going broke just got more expensive.

From today, it will cost $120 to file for bankruptcy, and another $150 to travel overseas while you’re bankrupt.

The Federal Government estimates the new fees will deliver it an extra $25 million over the next four years.

Consumer law groups say the changes will deepen the financial woes of people who can’t afford to pay their debts.

Business reporter Pat McGrath has more.

PAT MCGRATH: The Federal Government’s plan to increase personal insolvency charges was announced in the Mid-Year Economic and Fiscal Outlook in December, and the details of the fees were released on at the end of February.

Karen Cox from Sydney’s Consumer Credit Legal Centre says she received an email confirming the changes were going ahead late on Friday.

KAREN COX: We certainly found out about it earlier this year. We put together a joint submission with the Lismore and District Financial Counselling opposing the change and those submissions only closed a few weeks ago, and we’ve heard nothing back in response to the submission, and certainly there was nothing in the announcement saying that it was going ahead about the outcome of the consultation or any of the views that have been expressed.

PAT MCGRATH: But this has been the start date – April 1 was made clear at the end of February. We knew this was going to happen, didn’t we?

KAREN COX: We were told that, yes it would start on 1 April, at the end of February, and then they asked for submissions.

PAT MCGRATH: Karen Cox says her service receives hundreds of calls every year from people contemplating bankruptcy.

KAREN COX: People only do this when they’re at the end of their tether.

The majority of people who apply for bankruptcy have incomes of under $30,000. Certainly callers to this service, 60 per cent or more of people who call up about bankruptcy, have incomes of less than $26,000, and in most cases they’re unemployed or ill or caring for someone in circumstances where they are not going to be able to get employment in the foreseeable future.

PAT MCGRATH: Along with the new fees, the Government has also increased the levy on money recovered from people who have entered bankruptcy.

That’s known as the realisation charge and has increased from 4.7 per cent to 6 per cent.

The changes will generate $3.5 million in revenue for the Government in the final few months of this financial year and $7 million next financial year.

Fiona Guthrie heads Financial Counsellors Australia, the peak body for non-profit financial counsellors.

She says the changes have been poorly handled.

FIONA GUTHRIE: What’s happened here is that the folk in the finance department have not understood the policy implications of this.

It has not been thought through; there’s been no policy analysis. The consultation process was a sham.

PAT MCGRATH: The Finance Minister and Acting Assistant Treasurer Mathias Cormann has not responded to The World Today’s questions about the changes and the consultation process.

Gerard Brody from the Consumer Action Law Centre believes the changes will discourage from seeking bankruptcy protection.

GERARD BRODY: Bankruptcy lasts for three years as a general rule. It will be listed on an individual’s credit report for five years and, in fact, it will be listed on the National Personal Insolvency register forever.

So it is a black mark that stands against a person’s name and there are serious repercussions.

People don’t choose bankruptcy lightly, but where it’s the most appropriate choice because their situation is so difficult, then it should be as accessible as possible.

PAT MCGRATH: But even if somebody considering filing for bankruptcy doesn’t have enough cash to cover the application fee there are other payment methods available.

GERARD BRODY: They are accepting credit card payments for paying the debtors filing fee. That’s really strange. It may end up that someone uses their credit card to pay their fee, only to go bankrupt on that debt.

PAT MCGRATH: So the payment is never actually made by the person who’s applying?

GERARD BRODY: Well, it’ll be made, the result will be that the bank or the lender that gave them that card will be left with an unrecoverable debt.

ELEANOR HALL: That’s Gerard Brody from the Consumer Action Law Centre, ending that report by Pat McGrath.

Article available at: http://www.abc.net.au/worldtoday/content/2014/s3975762.htm

Article 2:

“Want to go bankrupt?  That’s $120, thanks” by Jane Lee at Legal Affairs for The Age

2 April 2014

People filing for bankruptcy will now have to pay a $120 fee to the Australian Financial Security Authority (AFSA) to do so.

The Abbott government introduced the fee in a regulation late last week, which came into effect on Tuesday. It could reap about $2 million annually from the fee, with about 20,000 people expected to become bankrupt this financial year.

Consumer advocacy groups are concerned people will be unable to afford bankruptcy, which will prevent them moving on with their lives.

”Financial counsellors see people who have literally just a gold coin in their pockets when they file for bankruptcy,” Financial Counselling Australia executive officer Fiona Guthrie said. ”If people can’t afford the fee, they will either remain trapped in debt or ask charities to pay the fee for them. All that will do is shift the cost burden to the community sector.”

Kat Lane, from the Consumer Credit Legal Centre, said that in NSW people who could not afford bankruptcy could also have their personal possessions seized by the courts to pay off their debts.

Consumer Action Law Centre chief executive Gerard Brody said that most people who went bankrupt last year listed unemployment as their primary reason. Most had earned less than $30,000 in the previous year.

AFSA says on its website that it accepts payment for services by cheque, direct credit or credit card. ”It could be that somebody pays with their credit card and then adds that credit card debt into their bankruptcy,” Mr Brody said.

While advocacy groups were consulted on the fee in February, Mr Brody said it was first announced in the federal government’s midyear economic and fiscal outlook last year.

Greens senator Penny Wright said the party would lodge a motion to disallow the regulation when Parliament returns in May. Labor is expected to support it.

“It defies reason to require people who are in the worst kind of financial trouble to pay a fee to go bankrupt,” she said. ”The risk is that we’ll see more people trapped in cycles of debt, poverty and uncertainty because they don’t have the means to file for bankruptcy.”

An Attorney-General’s Department spokeswoman said the fee was to ”recover the costs of administering personal insolvencies”.

Article available at: http://www.smh.com.au/federal-politics/political-news/want-to-go-bankrupt-thats-120-thanks-20140401-35wgl.html#ixzz2xlvJMnfv