Creditor’s Statutory Demands and Bankruptcy Notices
On 25 March 2020 the Federal Government introduced legislation to give relief to businesses and individuals during the coronavirus pandemic. This legislation was recently amended and this article seeks to summarise both the changes to Bankruptcy Notices and Creditor’s Statutory Demands introduced in March and the most recent amendments. https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf
Creditor’s Statutory Demands
Creditors use statutory demands to collect debts from company debtors. $2,000 is the minimum debt amount that must be owed. The debtor must pay or compromise the debt or apply to set aside the Demand within 21 days from the date of service.
The changes introduced in March 2020 increased the minimum debt limit from $2,000 to $20,000. The changes also increased the timeframe for complying with a statutory demand from 25 March 2020 to 25 September 2020.
The recent changes extended this period further until 31 December 2020.
Bankruptcy notices
Creditors use bankruptcy notices to collect debts owed by individual debtors. The prerequisite to the issue of a bankruptcy notice is a judgment order from a court against the debtor for a minimum amount of $5,000. Once a creditor has judgment, they can issue a bankruptcy notice. A debtor has 21 days after receipt of a bankruptcy notice to either pay or compromise the debt or apply to set aside the notice.
Under the changes introduced in March the minimum debt limit was increased from $5,000 to $20,000. The Government also increased the 21 day time for compliance for 6 months from 25 March. The logic behind the changes to bankruptcy notices was to give individual debtors breathing space.
The most recent changes introduced this month extended the timeframe for compliance further, until 31 December 2020.
Our help
Our team at Parkston Lawyers can help both creditors who are seeking to recover debts under these new rules and debtors who may be able to take advantage of these changes.