Media release: Advocates object to new fee for entering bankruptcy

A coalition of consumer advocates and financial counselling agencies has expressed dismay at a plan to charge Australians filing for bankruptcy. The Australian Financial Security Authority (ASFA) has proposed to impose a new fee of $120 from 1 April 2014.

Financial Counselling Australia, Consumer Action Law Centre, Consumer Credit Legal Centre, and Footscray Community Legal Centre, will be taking their concerns to the Federal Government in the hope it will intervene before the fee is implemented.

‘People considering bankruptcy are at the end of their tether,’ said Fiona Guthrie, Executive Director of Financial Counselling Australia. ‘They simply won’t be able to afford the fee, which means either that charities end up having to pay for them, or that people will remain trapped in poverty, fighting off calls from creditors and debt collectors.

‘In New South Wales, people who can’t afford bankruptcy will face the real possibility of having personal possessions seized through court enforcement processes—possessions that would be protected in bankruptcy,’ said Ms Guthrie.

The new fee is being referred to as a ‘cost recovery’ measure, but Gerard Brody of Consumer Action described the plan as out of touch. ‘Bankruptcy statistics show that the majority of bankrupts earned less than $30,000 in the year before they entered bankruptcy, and that unemployment is the primary cause of non-business related bankruptcy’, said Mr Brody.[1] ‘Annually, there are almost 20,000 Australians that apply to enter bankruptcy.[2]  This is a group of people that are financially vulnerable.’

‘Last year, over 1200 Victorians sought advice about bankruptcy from our telephone financial counselling service. While not everyone that seeks advice will end up entering bankruptcy, if this option involves even a small fee, debtors that are trying to improve their situation will have reduced options’, said Mr Brody.

The organisations said that in countries such as the US and UK, bankruptcy has become inaccessible to low income debtors because of the fees and difficulties imposed by authorities.

‘It is important that bankruptcy remains accessible, thereby supporting not only debtors but creditors and the entire financial system. Discharging debts means that impoverished debtors get a fresh start, but also enables business to have certainty and move on,’ said Mr Brody.

END

Media contact: Dan Simpson, 0413 299 567

[1] https://www.afsa.gov.au/resources/statistics/profiles-of-debtors-documents/profiles-of-debtors-2011

[2] https://www.afsa.gov.au/resources/statistics/selected-statistics/selected-statistics-2012-13

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