New Insolvency Act comes into force

The Insolvency Act 2006 came into force on 3 December, replacing the Insolvency Act 1967.

The changes made by the new Act include:

• A new alternative to bankruptcy. Consumer-type debtors can seek entry into the No Asset Procedure (NAP) if they have no assets of any realisable value, no means of repaying their creditors, debts of between $1,000 and $40,000, have not been bankrupt or entered the NAP before, and have no trust involvement.

• Responsibility for administration of the Summary Instalment Order (SIO) regime is transferred from the District Court to the Official Assignee. SIOs give debtors with the means to pay their creditors a time frame to do so in order to avoid bankruptcy. The debt threshold for SIOs is increased to $40,000, with the period for repayment capable of being extended to five years under special circumstances.

• Responsibility for receipt of debtor petitions for bankruptcy is transferred to the Official Assignee.

• Entry into bankruptcy, NAP or SIO requires debtors to submit a Statement of Affairs with the application, which can be completed either manually or electronically.

• Where a bankruptcy is initiated by a creditor's petition, discharge will occur three years after receipt by the Official Assignee of a satisfactory Statement of Affairs.

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