Lee Melissa: Insolvency Amendment Bill — Second Reading 
Lee Melissa: Insolvency Amendment Bill — Second Reading 
[Volume:655;Page:5002] 
MELISSA LEE (National) 
: 
 It is a pleasure to rise this evening to speak to the Insolvency Amendment Bill 2009 in its second reading. Before I do that I echo the Hon Lianne Dalziel’s comments by thanking the officials who assisted the select committee process. 
In the current economic downturn the rate of insolvency is expected to rise. The introduction of this bill was very timely and a matter of urgency to prevent fraudulent debts from being discharged. It was introduced by the Minister of Commerce the Hon Simon Power to amend the Insolvency Act 2006 to preserve the integrity of the personal insolvency processes particularly the no-asset procedure and bankruptcy in order to provide more protection for creditors and potential creditors. It was very interesting to hear Mr Kevin Hague from the Green Party talk about people who are vulnerable. It is not just the people with lower income levels who are vulnerable but also people who lend money to potential fraudsters. I do not think any members in this House will disagree with the objective I mentioned earlier which is to uphold the integrity of the personal insolvency processes. Having sat through the Commerce Committee meetings I know that all members from all sides in this House pretty much agree with most of the provisions in this bill. 
I start by talking about the no-asset procedure. The no-asset procedure is like getting a free pass in a Monopoly game I guess where we get to pass “Go” and collect $200. When a person has no means of paying off a debt of between $1000 and $40000—which is a lot of money I say to Mr Hague—they can apply to go on to the no-asset procedure. It was introduced as an alternative to bankruptcy in December 2007. It is indeed a great opportunity for someone who is in a financially distressed situation and can see no way out. They effectively get a clean slate after 1 year. This procedure was for people who had no realisable assets that they could possibly sell to pay creditors so that they can avoid the stigma of bankruptcy as Mr Chauvel said and rebuild their financial lives. 
Although this procedure is a great opportunity for people who are genuinely in difficulty the Insolvency Act 2006 created a loophole as we have already heard in this House allowing fraudulent debts incurred by individuals going into the no-asset procedure to be wiped. This was obviously an anomaly that needed to be corrected and the Insolvency Amendment Bill 2009 does that. The select committee has recommended that a minor amendment be made to the bill to clarify that fraudulent debts become enforceable again after a debtor is discharged from the no-asset procedure and the debtor be liable to pay interest and penalties accrued during the no-asset procedure. I think that is fantastic. If people who are in this no-asset procedure for a year—and as we are proposing on the register for 5 years—incur interest while they are on the no-asset procedure they will need to pay that debt after they are discharged. 
Another thing this bill does is give more power to the official assignee to investigate a debtor who applies to go on to the procedure by extending the period of discharge by a maximum of 25 days. That will allow any new information on debts or information relating to concealed assets to be brought to the attention of the official assignee right up to the day the debtor is discharged. With the new information the procedure can be terminated. 
The other aspect of the bill is to allow the official assignee the ability to recover gifts made by a bankrupt to a third party prior to his or her bankruptcy. It has long been an accepted presumption that if one is declared bankrupt one has been insolvent for a period of time before that declaration of bankruptcy is made. If one is able to make a gift to a third party one’s insolvency should be questioned and the gift should be seen in light of one’s bankruptcy as a way to hide assets often by way of setting up trusts etc. to avoid paying creditors. This bill puts the onus of proving the solvency of the person who has made the gift not on the official assignee but on the recipient of the gift. I think that is brilliant. If I have received a gift from an insolvent person who declares himself bankrupt I have to prove that he was solvent when he gave me that amazing gift. If I cannot prove that I have to give it back and I think that is brilliant. 
This bill reverts to the Insolvency Act 1967 around insolvent gifts extending the 2-year time frame prior to becoming bankrupt to 5 years. If I declare myself bankrupt tomorrow the time frame will go back 5 years and any gift I have given in that 5 years can be taken back to pay creditors. The select committee has also recommended a minor amendment to this aspect of the bill to include a clause to clarify that gifts would be “realisable assets” and therefore disqualify the debtor from entry to the no-asset procedure. This would ensure that debtors cannot conceal assets from creditors by gifting to another person. 
During the first reading of this bill there was a lot of opposition to the length of time the bill proposed a debtor’s name remain on the no-asset procedure’s public register and once again tonight we have heard from the Hon Lianne Dalziel Mr Chauvel and the Green Party that they are concerned about it. The time period we are proposing is not intended to harm people who are as Mr Hague said poor and vulnerable. The bill proposes to protect the people who lend money to fraudulent people. It proposes that those people stay on the list for 5 years. For multiple insolvencies—for example for two or more bankruptcies or a no-asset procedure and a bankruptcy; not just a oncer where a no-asset procedure was introduced to protect innocent people who had difficulties paying off their debts—the time period that their names will stay on the register goes from 7 years to indefinitely. This is done to protect creditors and potential creditors. It could be you Mr Assistant Speaker Roy. You could be lending to someone whose name may only stay on the register for 1 year and then fall off and you may not know that that person has have been on the no-asset procedure or that he or she owes lots of people lots of money. 
The select committee recommends that a minor amendment be also made to the clause of the bill about the public register including a record of each insolvency of a person who has had two or more bankruptcies. That means it will include how much they may have had the procedure against how many times they have been through bankruptcy or whether they have been through the no-asset procedure. Because of the unreliable records before the 1967 Insolvency Act the committee recommended that they not be used for the public register. 
These amendments are required in order to maintain the integrity of the personal insolvency processes. These changes will prevent fraudulent debtors from avoiding the legal obligation to repay debts. These changes remove the potential to reward dishonest persons; we should not be rewarding dishonest people. I commend this bill to the House.