Financial Rights supports the central proposal to reduce the default period for bankruptcy to 1 year from 3 years. This strikes an appropriate balance between the interests of creditors, and ensuring that bankruptcy enables a fresh start for debtors, and is not needlessly punitive. Reducing the bankruptcy period will significantly improve the bankrupt’s opportunities for early financial rehabilitation and participation in economic activity.
Intuitively it would seem that debt agreements would drop in popularity because debtors would clearly opt for one year of bankruptcy over 3-5 years or more of a debt agreement. However, Financial Rights has no confidence this will occur because people entering debt agreements are not getting proper independent, conflict free advice. Financial Rights is therefore strongly of the view that Part IX of the Bankruptcy Act should be repealed because it serves the interest of debt agreement administrators and associated entities far more than the debtors and creditors it was created to assist.
