Higher bankruptcy threshold rejected by banks

Banks want the government to reconsider the proposed changes to bankruptcy rules in Australia, it has been reported.

According to the Australian Bankers’ Association (ABA), the proposed $10,000 threshold, which is a marked increase on the $2,000 bankruptcy limit enshrined in law, could encourage people to run up bad debts with variable rate personal loans they cannot afford, reports the Australian.

In a submission to the Senate inquiry into the limit, the ABA said: "It is unclear how the proposed [$10,000] threshold has been arrived at and may operate as a disadvantage to small-business operators who are generally owed debts of much smaller amounts.

"A change of this magnitude further signals to a debtor that a failure to pay for lesser amounts is unlikely to result in bankruptcy and so dilute the importance to the debtor of the obligation to pay."

The ABA suggested setting the new threshold at $5,000.

According to Larissa Zimmerman, director and founder of National Financial Fitness, having a positive mindset can make it easier for people to get their debts in order, reported the Sydney Morning Herald.

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