As of 1 January 2021, the bankruptcy threshold has been permanently lifted to $10,000. This follows the decision made by the Federal Government in March 2020 to temporarily raise the pre-pandemic rate from $5,000 to $20,000 in order to prevent those hit hardest by the pandemic from being placed into bankruptcy. According to the Attorney-General, “The new permanent $10,000 threshold will ensure that Australians in financial difficulty are not made bankrupt over relatively small amounts of debt.” The new measure also accounts for the change in the value of money since 2010, when the threshold of $5,000 was introduced and reflects improved financial conditions from the height of the coronavirus crisis. The amended threshold has also been introduced in response to the reduction of emergency COVID-19 measures, which temporarily suppressed bankruptcies in 2020. For example, loan repayment deferrals and government stimulus packages like JobKeeper and JobSeeker.
Importantly, there are alternative actions available to creditors to recover smaller debts. Contact Morgan + English to discuss options for enforcement.