Australia's Gambling Industries - Productivity Commission

Bankruptcy
How many gamblers have been made bankrupt by gambling?
The National Gambling Survey indicated that 2900 people nationwide declare
bankruptcy each year as a result of their gambling activities. However, as noted in
chapter 7, the proportion affected is so small that the estimate is unreliable
statistically.
Official statistics on the causes of bankruptcy provide a lower number — some 317
bankruptcies a year attributed to ‘gambling and speculation’ in 1997-98 (appendix
R). These figures need to be viewed with some caution as gambling and speculation
which results in bankruptcy is an offence under bankruptcy law. Brading (1999)
commented:
Paragraph 271(a) provides that gambling or speculation up to 2 years before the
presentation of the petition is an offence if it “materially contributed to, or increased the
extent of, his insolvency.” .... Section 271 of the Bankruptcy Act has a surprising
effect. It takes behaviour which is legal, namely “gambling” or “speculation” and
retrospectively makes that behaviour into a crime. Gambling or speculation by a
bankrupt only becomes a crime following bankruptcy if it can be proven that it was
“rash and hazardous having regard to his financial position at the time and any other
material circumstances.”
While prosecutions are few in comparison with the numbers reporting gambling and
speculation as the cause of their bankruptcy (see Brading 1999), it is likely that the
possibility of prosecution results in significant under-reporting of gambling as a
cause of bankruptcy.
What is the cost of bankruptcy proceedings?
Bankruptcy can basically occur in two ways: as the result of a creditors’ petition, or
as the result of a petition by the debtor. The vast majority of bankruptcies
(93 per cent in 1997-98) are the result of a debtor’s petition, lodged with the ITSA
(Insolvency and Trustees Service Australia). A creditor’s petition involves the costs
of court proceedings.
The bankrupt’s estate will be managed by a trustee, which can be the ITSA. Some
95 per cent of bankruptcies in 1997-98 are managed by the Official Receiver,
(Inspector General in Bankruptcy 1998). The ITSA’s fees are:
… the whole of your bankruptcy estate up to $4,000. If your estate exceeds $4,000 the
fees are $4000 plus a percentage on a sliding scale of moneys received in excess of
$4,000.
MEASURING COSTS J.11