Introduction of Personal Insolvency Fees: Submission to AFSA

We strongly oppose the introduction of Debtor’s Petition fee.  This new $120 fee will have very serious consequences for our clients, their creditors, and the wellbeing of their families and the health of the communities they live in. The majority of clients that we advise about filing for bankruptcy are on very low incomes, and by the time they are contemplating bankruptcy they are in severe financial hardship. Key points made in our submission:

• A scan of our casework records (including both our legal advice and financial counselling services) reveals that we have on record at least 1600 calls from low income and vulnerable clients relating to bankruptcy per year. Of those callers 62% report they are living on an income of less than $26,000 per annum (with some reporting no income at all).
• For this group of debtors a $120 fee to file for bankruptcy will be a significant financial burden.
• One of the inevitable consequences of the new fee for lodging a Debtors Petition is that fewer debtors will file for bankruptcy.  This will be a terrible result for everyone from creditors, to the debtor’s family to the community at large.
• Another consequence of introducing a fee for lodging a Debtor’s Petition is that debtors will be forced to incur more debt in order to come up with the $120 fee.
• Charitable organisations will likely carry the burden
• If a fee is introduced for lodging a Debtor’s Petition, there should be a waiver for low income debtors
• The bankruptcy regime already imposes an income contribution requirement that is tied to income and number of dependents, and is recovered from post bankruptcy income rather than set up as a barrier to entering bankruptcy in the first place.
• The Realisation Charge is a more appropriate way for AFSA to recover its personal insolvency costs

Since the submission of these comments to AFSA the proposed new fee has been disallowed in the senate and removed from the Debtor’s Petition Application.