It's high time that stakeholders had their say.

THE bankruptcy reform agenda of the Federal Government needs a thorough overhaul. Reform may be desirable, possibly even necessary given the growing number of bankruptcies, but the Government's proposals do not tackle the real needs.

There may be a case for reducing the statutory period for bankruptcy from three years to one, but only for individuals with relatively small debts. Between 1992 and 2003, the Bankruptcy Act contained provisions whereby a bankrupt with debts not exceeding 150 per cent of income could be discharged after six months.

Reintroducing a similar provision would streamline the process where there is no benefit to creditors or the bankrupt in maintaining the bankruptcy and would allow the trustee the discretion to retain the bankruptcy if it is believed a better outcome might ensue for creditors or to facilitate further investigations.

In larger cases, obviously a one-year period of bankruptcy is inappropriate. Take this example.

I am currently the trustee in the bankruptcy of Glenn Phillip Duker, who owes his personal creditors a large sum, $34.5 million. His business affairs involve 36 companies, including a family investment company. The inter-connectedness of these businesses is staggeringly complex.

Duker was previously a solicitor turned Pentecostal preacher and several of his congregation are listed in the 22 pages of creditors against his personal estate. (Surprisingly, not a single creditor is prepared to underwrite the costs of further research into his affairs and I have been forced therefore to take the extraordinary step of applying to the Insolvency Trustee Service of Australia for the necessary funding.)

There is no possibility of disentangling this bankruptcy in 12 months. I also believe that Duker's creditors, whose financial lives have been destroyed by his bankruptcy, will not be satisfied if he were to be discharged after 12 months.

Attorney-General Robert McClelland must also consider the position of the banks and the Tax Office. Banks or statutory authorities do not act precipitously or capriciously in seeking a bankruptcy order. On the contrary, they go to considerable lengths to avoid it. It is only when the debt delinquency is insoluble and all efforts of compromise have failed that the bank or authority considers bankruptcy as a last resort.

If in such circumstances the debtor can then walk away after 12 months — whether or not they comply with the demands of the trustee — bankruptcy loses its usefulness as a credible sanction.

Although the proposed changes include provision for the payment of compulsory contributions for a period of three years (that is, two years after automatic discharge), payment of contributions will be almost impossible to enforce without incurring legal costs if the bankrupt has been discharged.

At present a trustee may use the coercive powers in the "objection to automatic discharge" provisions. Objection to discharge is not intended to be a punitive process but an inducement to comply with a requirement. It is a very effective instrument in maintaining the

co-operation of otherwise delinquent bankrupts, especially where a bankrupt defaults in payment of compulsory contributions.

It is proposed to increase the debt threshold at which a creditor can bring bankruptcy proceedings from $2000 to $10,000, a fourfold increase. In my view an increase to $4000 or $5000 may be justified and this threshold could be indexed.

But under the proposed changes, where a creditor's claim is less than $10,000, they will be obliged to seek other recovery processes or abandon the claim. This may create a situation where the bailiff is required to seize goods under a warrant — household goods that may be exempt property in a bankruptcy.

Another aspect of these proposals also needs to be challenged — that names and details of bankrupts be omitted from public register after a certain period.

This suggestion seems to fly in the face of the Government's own mantra of improved transparency.

Commercial credit bureau operators already remove credit history after seven years.

A search of the government register is usually conducted only when parties have need for specific information regarding a potential bankruptcy history. Surely investors and other interested parties should have the right to investigate the background of people with whom they may be doing business.

The Attorney-General says changes to bankruptcy administration will be made in consultation with the industry and I believe the Insolvency Practitioners Association will be making a submission. But I believe it would have been appropriate to approach directly all stakeholders to facilitate the best outcome for debtors, creditors and the administrators of the legislation.

Dennis Turner is a registered trustee in bankruptcy and partner specialising in insolvency and reconstruction with PKF Chartered Accountants and Business Advisers, Melbourne.