Lee Melissa: Insolvency Amendment Bill — First Reading 
Lee Melissa: Insolvency Amendment Bill — First Reading 
[Volume:653;Page:2021] 
MELISSA LEE (National) 
: 
 I rise to support the first reading of the Insolvency Amendment Bill. It is very interesting to note that the member opposite who just spoke Raymond Huo asked what the National Government has done about the economic situation. Well I say to him that if the previous Labour Government had performed so well in the last 9 years then National would not now be the Government. 
This bill amends the Insolvency Act 2006 to address a number of small but significant issues that National warned the previous Labour Government about when the legislation was previously being debated in this House. Specifically those issues are about the no-asset procedure. Just like the previous speaker I was not in the House at that time but I have read some of the speech notes and  
Hansard 
 records of that debate. The Labour Government did not heed the concerns and issues raised by some of the National members. Since the law was enacted those concerns have eventuated and now we are here to try to fix some of the problems. 
This bill makes two amendments to the existing no-asset procedure which some National MPs have likened to a “get out of jail free” card. We have had serious concerns about the abuse of this section of the current Act. We also make one amendment to the current bankruptcy procedure and one amendment concerning the availability of information about people who have been through both the no-asset and bankruptcy procedures. 
The changes to the no-asset procedure close a current loophole around fraudulent debt. Currently the no-asset procedure allows debts that have been incurred by fraudulent means to be discharged—yes discharged—whereas the bankruptcy law prohibits them from being written off. The no-asset procedure is a subset or an alternative to the bankruptcy law and when the two laws are inconsistent the law must be realigned. This will maintain the integrity of the no-asset procedure process. This means that if any debts are created by fraud or if the debtor has induced someone to write off a debt by means of a fraud then these debts can be enforced after the debtor is discharged from the no-asset procedure. This means that it will no longer be a case of rewarding a dishonest person which I am sure was not the intention of this law when it was introduced. 
The other amendment to the no-asset procedure is the extension of the period of discharge by allowing the official assignee to extend the period of discharge by up to 25 days in order to undertake investigation into any objections or late information about the debtor’s entry into the no-asset procedure—which is by the way voluntary—putting the debtor on a full 12 months’ notice that he or she should come clean with their debts and assets if they have been concealed in any form to avoid paying his or her creditors. This amendment brings the no-asset procedure into alignment with the bankruptcy discharge provision in the Act extending the notice period by inclusion in the register to 5 years. 
The third amendment relates to insolvent gifts. This amendment reverts back to the Insolvency Act 1967 whereby the official assignee does not have to spend time and taxpayers’ money proving that the debtor was insolvent when making gifts within a 2 to 5-year period prior to his or her bankruptcy. This means that a person is disqualified from the no-asset procedure if the official assignee is satisfied on reasonable grounds that the debtor has concealed assets with the intention of defrauding his or her creditors for example by transferring property to a trust. The official assignee can actually disqualify the debtor from the no-asset procedure. 
The onus of proof of solvency in this case—that is solvency at the time of gifting—lies with the recipient of the gift. I think it is wonderful that the official assignee will not have to spend money and time proving that. Gifts made in the 2-year period prior to the bankruptcy are covered by the longstanding presumption that debtors are technically insolvent for a period of time before they file for bankruptcy. If they are giving gifts during that time I think everyone knows that those gifts are made with the purpose of avoiding payment to creditors. 
The final amendment is one that I am sure banks and the public will welcome and some members in this House have also raised some concerns about this issue. At the moment the name of anyone who goes into the no-asset procedure stays on the no-asset procedure public register for only 1 year. The amendment extends that stay on the public register to 5 years. It also provides for the no-asset procedure and bankruptcy public register to be searchable for those who have been subject to two or more insolvency procedures. 
This amendment is not about punishing people who are destitute and who cannot pay their debts; it is about people who actually do it more than once twice or three times. This provision will allow credit agencies or lenders access to information about an individual’s insolvency history for longer. This addresses the concern that the no-asset procedure was too debtor friendly. The rights of the creditor ought to prevail. 
It seems that with these tough economic times people are using the no-asset procedure as a way out of paying their debts. According to bank workers I spoke to last week there is a significant increase in write-offs by banks as a result of no-asset procedures. Because there is not the stigma attached to the no-asset procedure that there is with bankruptcy people seem to not be afraid to enter into the no-asset procedure in order to avoid their fiscal responsibilities. Perhaps with these amendments we may reinforce a modicum of personal responsibility on those people who see the no-asset procedure as a way to avoid paying their debts. 
I look forward to the submissions to the Commerce Committee on these amendments and to discussing and debating them with my colleagues. I commend this bill to the House.