Written by Glen Pitt in July, 2007

Recently the Insolvency and Trustee Service Australia (“ITSA”) called for submissions into proposed new formats concerning the timing of initial notification to both Registered Trustee’s and to major creditors associated with a Bankruptcy. As ITSA notes in its correspondence it has currently piloted a program whereby those larger creditors i.e. financial institutions and utilities are “electronically contacted within 2 working days from acceptance of the Debtor’s Petition”. ITSA continues by noting, however, that other, or smaller creditors, will be notified by ordinary mail within the current five day period. Currently, this pilot is restricted to bankruptcies administered by the Official Trustee, however, operational improvement, we are told, will allow ITSA to broaden the scope of the program.

The advantages of such a system are worth noting. The earlier receipt of a bankruptcy, coupled with the new format’s instructions for the cessation of legal recovery activities on the part of an unsecured creditor are welcome. Much time is spent, presumably not only by the creditor, but also the Registered Trustee in attending to situations where people and organisations, who, through lack of information, and or knowledge, continue with these actions incurring greater costs, plus placing time constraints on the office of the Registered Trustee. Similarly, such provision of earlier notice alleviates the pressures on the debtor from aggressive creditors. The Registered Trustee also stands to gain from the process insofar as creditors may contact them sooner with information that can expedite the Trustee’s investigations. For this ITSA deserve credit in attempting to address the concerns of all affected parties.

On the other hand, as with any new system that purports to be all things to all people, the devil is in the detail, and its application. As noted above, the advantages to the larger creditors are clear, however, it is those same institutions who through internal procedures, and greater resources, have the capacity to move quickly to assimilate and convey information. However, it is largely the smaller ‘Mum and Dad’ operators who are either unaware of their positions, and/or need to seek further advice to establish this. The provision of this information to them is just as relevant and time saving where all parties are concerned. At the other end of the spectrum, can we feel sure that the implementation of such a system will always result in the Registered Trustee receiving prior notification that a Debtor’s Petition was accepted before any other related party (outside of ITSA), or alternatively, that assuming there is an issue that delays the provision of the confirmation of appointment by ITSA to the Registered Trustee; such an occurrence is factored into the notification process where these larger creditors are concerned?

The implied assumption here is that ITSA will be able to ensure that the timing of this correspondence will accord with the various needs of the parties. Why is this a consideration? Is it that critical? We are advised that the notification process will be electronic, and presumably involve a simple, automated download and email action to these creditors. A tick and flick to creditors already piled onto a database is a no-brainer, but more time, and confirmation, is required to correctly identify the Registered Trustee who initially provided the Consent to Act. How does ITSA ensure that one process does not overlap the other? presumably, it is in the timing…….!