A scan of Consumer Action’s casework records (including both our legal advice and financial counselling services) reveals that we have on record at least 1900 calls from low income and vulnerable clients relating to bankruptcy during the 2012-13 financial year, and since 1 July 2013, we have received a further 1300 calls. So our thoughts are well informed, and are shaped by real life experiances.
Proposal to introduce Debtor’s Petition Fee
A fee to go bankrupt means the most vulnerable people are stranded—they may not be able to bankrupt, and instead will have the stress of further contact from creditors and unmanageable debt inhibiting them from being able to improve their situation.
Other potential negative impacts include driving debtors to approach fringe lenders to fund their bankruptcy or debt repayments, or push them toward the wrong type of insolvency agreement for their situation. There is a sad irony in a debtor seeking additional credit (from a payday lender or otherwise) to pay for a debtor’s petition, only to add this to the debts upon which they will go bankrupt.
The proposed fee could result in charitable institutions being called on to fund the applications (as has been the experience in the UK), which would likely result in a decrease in service delivery elsewhere.
The proposed fee could also be funded from other government agencies as support for low income and vulnerable individuals who already receive income support, which would be an inefficient internal cycling of public funds.
Consumer Action submits that the CRIS is deficient in that:
- There is no data about the impact on existing service delivery on those institutions who may be called upon to provide this additional financial assistance as an emergency relief measure;
- It fails to explore the possibility that other government agencies may provide financial assistance to debtors through other assistance payments;
- It has given no consideration to the behavioural impacts of debtors deciding not applying for bankruptcy, or delaying their application, as a result of a fee; and
- It does not attempt to assess any possible reduction in debtor’s petitions because of the new fee.
Proposal to introduce Overseas Travel Requests Fee
Consumer Action does not oppose the proposal to introduce a fee for overseas travel requests. However we submit that there should be a waiver process for low income bankrupts in extenuating circumstances, such as to attend the funeral of a close family member or to visit a close family member who is seriously ill. The applicant is likely struggling to find the funds to travel, and the $150 processing fee is an unwelcome and unnecessary extra burden at a difficult time.
Proposal to increase Realisations Charge
Consumer Action submits no opposition to the proposed increase to the Realisations Charge, and recommends that as a cost recovery mechanism, this is a more appropriate way to continue to deliver the desired budgetary outcome.
A full copy of our submission is available by clicking: Filing fees for debtors’ petitions, overseas travel requests and an increase to the realisations charge