Some time ago, in what may have been a marketing or plain English push, the bankruptcy regulator, AFSA, determined that, for its purposes, the debtor’s petition under s 55 of the Bankruptcy Act and the statement of affairs under s 54 would be consolidated into what was called the “Bankruptcy Form”, glossing over the legislative requirements.
Bankruptcy Form/2
In a reversal of this unwise approach AFSA has now reverted to following the law, with the current Bankruptcy Form now becoming two forms, “in line with legislative requirements”, the Debtor’s Petition and the Statement of Affairs. Those applying for bankruptcy by ‘Debtor’s Petition’ must complete both forms and that those made bankrupt by sequestration order will need to complete the ‘Statement of Affairs’ only. See Changes to the Bankruptcy Form | Australian Financial Security Authority
As I reported in “Voluntarily becoming bankrupt” – the new bankruptcy process – Murrays Legal of February 2022, the Bankruptcy Form was criticised by Justice Logan in Thompson v Lane (No 3) [2022] FCA 128, who among other comments said that the “Form” included no statement by the debtor that they were presenting their petition under section 55 of the Bankruptcy Act,
“instead, the current [form] contains the presumptuous statement, “I am voluntarily becoming bankrupt” … Yet further, it contains a presumptuous question, “What do you believe is / are the cause(s) of your insolvency?” without eliciting a prior admission of insolvency by reference to the position disclosed on the “statement of affairs” portion of the form”.
Temporary debt protection?
Another attempted plain English term by AFSA is the “temporary debt protection”, referring to s 54A of the Bankruptcy Act being “a declaration … of the debtor’s intention to present a debtor’s petition”.
AFSA’s Temporary debt protection | Australian Financial Security Authority refers to
“Division 2A of Part IV of the Bankruptcy Act [which] provides for the presentation of a declaration of intention to present a debtor’s petition. For ease of reference, the form has been renamed the temporary debt protection form”.
Section 6D
As I have explained, section 6D of the Bankruptcy Act seems to allow AFSA to make these changes in the nature of delegated legislation.
Broadly, the section provides that a document that the Bankruptcy Act requires to be in an approved form must be in the form approved by the Inspector-General and include the information, statements, explanations or other matters required by the form and be accompanied by any other material required by the form. The Insolvency Practice Rules may add further requirements, including as to how the form is to be completed and verified.
It is somewhat Alice in Wonderlandish, allowing the Inspector-General to choose to say what the law requires the form to require – “neither more nor less”.
Comment
While matters of industry practice can diverge from the strict reading of a section, there is a danger of this leading to non-compliance with the law.
A prime example of this is the long-time practice of AFSA
“and its predecessors, to record a bankruptcy applicant’s statement of affairs as having been filed on the date it is accepted, rather than the date it was initially filed or ‘presented’”. … This meant that the date taken to be the ‘filing date’ by AFSA may not have aligned with the ordinary meaning of when something has been ‘filed’”.
This led to the necessity for remedial legislation – the Bankruptcy Amendment (Discharge from Bankruptcy) Act 2023 – that was complex, retrospective – back to 1992, and had to guarantee constitutional remediation.
It amended the Bankruptcy Act to regularise and validate the past administrative processes of AFSA
”its predecessors and things done, purported to be done, or not done, in reliance on the administrative practice relating to the determination of when a statement of affairs is taken to have been filed for the purposes of a debtor’s petition or as required in relation to a sequestration order”.
See now s 57B which sets out the current law, but to which section no reference is made. Nevertheless, the present position is now stated by AFSA Changes to the Bankruptcy Form | Australian Financial Security Authority and not by this commentary.
It may be that the need to regularise the 1992-2024 processes of AFSA has prompted a pulling back of lay explanations of the law such as the Bankruptcy Form.
The future
While dates of commencement of a bankruptcy and the like will remain important, the process of putting information on the record may change, with the use of AI.
The English Insolvency Rules did away with most forms some years ago under a red tape removal drive. English readers might like to advise how the removal of forms in 20117 went, before AI? UK insolvency practitioners can F…. their Forms – Murrays Legal
As I have said, my copy of Muir Hunter’s book on the 1914 UK Bankruptcy Act lists as many as 202 forms for various types of notification requirements. Perhaps, in 2025, there is another way?
While confined to corporate insolvency, these issues are usefully discussed in The future of corporate insolvency law: A review of technology and AI-powered changes, by A Kamalnath, (2024) (33) International Insolv Rev 40–54. She explains, for example, the digital portal called KOSTI in Finland which I reported in ‘Modernising’ insolvency communications – Murrays Legal
