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Greater protections for people entering into debt agreements to avoid bankruptcy

Media Release

Greater protections for people entering into debt agreements as a mechanism to avoid bankruptcy are the result of new laws passed today by the Australian Parliament.

"This is the most significant reform of the debt agreement system in a decade," Attorney-General, Christian Porter, said.

"Debt agreements are an important and increasingly popular alternative to bankruptcy for individuals who are facing financial difficulty.

"But, over time, it had become clear that aspects of the debt agreement framework and some in the industry were putting financially vulnerable people at risk of entering into agreements which were not affordable – further compounding financial stress.

"The Coalition's reforms not only protect the interests of debtors and creditors by ensuring that debt agreements are reasonable and sustainable, but it will also improve professional standards in the debt agreement administrator industry.

"Debt agreement administrators deal with some of the most vulnerable people in our community, and the Bill professionalises the industry to reflect its important function."

The Attorney-General said the new laws in the Bankruptcy Amendment (Debt Agreement Reform) Bill 2018 would also ensure repayments under debt agreements are based on an affordable payments schedule based on a percentage of income which will be settled in consultation with key industry bodies, consumer groups and creditor representatives.

Other measures include:

  • Limiting the length of a debt agreement proposal to three years, allowing debtors to manage their debts in the short term and work towards a fresh start, while maintaining some flexibility to allow extensions.
  • Doubling the current asset eligibility threshold (from $113,350 to $226,700) in recognition of the growing value of Australia's property market, opening up the debt agreement option to more people who are facing financial difficulty.
  • Providing the Official Receiver in Bankruptcy the ability to reject proposed debt agreements which would cause undue financial hardship to the debtor.
  • Deterring unscrupulous practices by a small minority of debt agreement administrators by setting stricter practice standards; tougher penalties for wrongdoing (such as a new six month period of imprisonment if an administrator offers a creditor money with a view to influencing their vote) and granting the Inspector-General in Bankruptcy additional investigative powers to address misconduct.
  • Ensuring greater professionalism into the industry by requiring debt agreement administrators to hold and maintain professional indemnity and fidelity insurance as a requirement of registration.

The reforms will commence nine months after Royal Assent, giving the debt agreement industry time to prepare for the changes.

"I welcome passage of this key piece of legislation, which will enhance the transparency of the debt agreement industry and introduce a robust set of safeguards to protect vulnerable debtors from entering into debt agreements that are set up to fail," the Attorney-General said.


Between 2007 and 2017, new debt agreements increased from 6,560 to 14,639 per year. During the same period bankruptcies (personal insolvency) declined from 25,754 to 16,378.