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BFCSA: New bankruptcy fee to net Federal Government $25 million over four years

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New bankruptcy fee to net Federal Government $25 million over four years

Updated Wed 2 Apr 2014, 8:35am AEDT

The Federal Government is hoping to earn $25 million over the next four years by charging people a fee to prove they are broke.

From today, filing for bankruptcy protection will cost $120, while travelling overseas while bankrupt will attract a $150 charge.

It has been revealed the fees can be paid by credit card, meaning the cost could ultimately be borne by a bankrupt person's lender.

The Government's decision to start charging fees to cover the costs of personal insolvency administration was announced in December's mid-year economic and fiscal outlook.

Gerard Brody from the Consumer Action Law Centre says the details of the fees were released a few months later.

"In early February, the Australian Financial Security Authority (AFSA) put out a consultation paper about the charge, and that closed about a month ago. And a decision was actually made to go ahead with the charge late on Friday night, with effects from today, the 1st of April," Mr Brody said.

Consumer law groups say they have not received any responses to their submissions to AFSA, which administers personal bankruptcies.

"It appears the decision, to us, has been made by the Government as part of their mid-year economic forecast process, but it wasn't made clear exactly how the charge would affect people," Mr Brody said.

"And looking at that detail, we now find out that it ... very late on a Friday evening, that the charge is going to come into effect the following week. We think that's a pretty poor process."

It is understood the fees will deliver about $3.5 million to the federal budget before the end of this financial year and start earning about $7 million a year from July.

Treasury will be the recipient of the revenue, making Attorney-General George Brandis responsible for the changes.

His office declined to comment on the issue.

It's really a regressive step. It's really like trying to get blood from a stone. People looking at bankruptcy are at the end of their tether.

Gerard Brody.


Mr Brody expects the new fees to discourage people from seeking bankruptcy.

"It's really a regressive step. It's really like trying to get blood from a stone," he said.

"People looking at bankruptcy are at the end of their tether. It's our experience that people want to pay their debts, but they're just insurmountable, and bankruptcy's the only way forward to get that huge weight off their shoulders and get a fresh start.

"For those that enter bankruptcy that do have income above the threshold, or assets, then there are processes in place for the trustees to recover that to contribute to the costs of bankruptcy."

The Government has also increased its share of the money that is returned to creditors and lifted the levy known as the "realisation charge" from 4.7 per cent to 6 per cent.

There is a chance those creditors could bear some of the cost of the new fees.

Mr Brody says it is concerning that credit cards may be used to pay the fees.

"They are accepting credit card payments for paying for the ... filing fee. That's really strange - it might end up that someone uses their credit card to pay for their fee, only to go bankrupt on that debt," he said.

Insolvency law expert Christopher Symes from the University of Adelaide says he is concerned about the fee charged on bankrupt people who want to travel overseas.

"The act certainly requires that passports are forfeited when a person becomes bankrupt," he said.

"I think that if they're going to travel overseas they're going to be generally funded by other people, but it does seem a little unfair, firstly, to charge, but just going to the root of that, the fact that still in Australia we require bankrupts to hand over their passports.

"The freedom of travel is a right that all Australians to enjoy, and I suppose that, given we're an island continent, it's not that uncommon for us to seek to travel, to have relatives and friends that we need to visit overseas."

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  • doyla66
    doyla66 Wednesday, 02 April 2014

    Is this for real or just an April Fool's day joke? Had ASIC protected the right interests there would be few consumer bankrupts to even think of collecting a fee from! To know they have now decided to add icing to the cake is disgusting for it is only consumers who will be impacted. I now recall being told some 10 years ago of some new insurance policy one could take out if they declared themselves bankrupt and was even told the name of one businessman who did so prior to declaring himself bankrupt!

  • doyla66
    doyla66 Thursday, 03 April 2014

    This is certainly not a pat on the back for the Government. Pretty disgusting really when you consider we are supposed to be the lucky country who rode out the GFC so amazingly. There should not be bankrupts to take advantage of Government. Just shows the economy is not what the Government makes it out to be. Then again what's another $120 for poor consumers who have no money Government. ?? Sure collect your $25 million Government and take advantage of the poor again. Why don't you implement a fee for every time a homeless person sleeps under a bridge or sleeps on a park bench. Think of the revenue you would collect Government. Disgraceful isn't it that in this day and age thousands sleep on the streets each night. !!!!!! Australian Government you should be ashamed of yourself.

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