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Bankrupts slugged with a new Government Fee

If you file for bankruptcy you will now have to pay $120 to the government. This is a new fee introduced by the government to cover the costs of administering bankrupts. This is likely to affect about 20,000 Australians – the number who are expected to file for bankruptcy this financial year.

This is concerning because people who are considering bankruptcy are doing so because they are broke – and if they can’t afford the fee, then what? Should they add the cost of the fee to the figure they owe their creditors? Should they ask a charity to pay it? If they simply cannot afford to file for bankruptcy, people are unlikely to be able to settle their debts and move on with their lives.

The government releases an annual report while outlines the number of personal insolvencies in Australia and the reasons given by insolvents. Most people who file for bankruptcy earn less than $30,000 a year or are unemployed at the time. People like this – already broke – are unlikely to be able to cough up a spare $120.

Many personal insolvents have unmanageable credit card debt and yet ironically the $120 fee can be paid by credit card. Bankrupts with credit card debts are likely to include that $120 in their bankruptcy application and this could mean that the cost may in the end be borne by the credit card company or bank.

Whoever pays the fee, it is just another bill to add to the misery of people who are facing bankruptcy. Some believe that this may in fact discourage people from filing for bankruptcy but this seems doubtful given that one more bill in a sea of bills is unlikely to stop a broke person looking for a way out.

And over time more Australians will be affected. Bankruptcy figures were released for the March quarter of 2014 by Australian Financial Security Authority and show that the number of Australian bankruptcies increased by 3.31% over the past year.

In particular, the number of people declaring bankruptcy in the ACT rose. Data gathered by AFSA shows that there was an increase, by nearly 28%, of bankruptcies in the ACT between the 2012 and 2013 financial years.