Debt of $10K could be new bankruptcy minimum

The law on bankruptcy could be modernised by the government, without the banks' approval.

The government is looking to modernise the law on bankruptcy, but the banks are not in agreement.

Ministers plan to increase the minimum debt that someone can be declared bankrupt with to $10,000 from $2,000.

The Australian Bankers Association (ABA) is not in favour of the plans and has said it would rather the minimum be $5,000.

It claimed: "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."

Creditors could be forced to wait 28 days instead of the current seven days before trying to recover debts, according to new proposals. But the ABA said 28 days was "too long".

These views come after quoting Reserve Bank figures that show the average outstanding bank account balance increased by $55 from October 2009 to November 2009.

But earlier this month Aussie advised switching credit cards to help clear debts, recommending an Aussie Mastercard.

By James Leyfield