On 25 March 2020 the Federal Government passed legislation to give relief to businesses and individuals during the coronavirus pandemic. This article seeks to summarise those changes to Bankruptcy Notices and Creditor’s Statutory Demands. https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf
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 new changes increase the minimum debt limit from $2,000 to $20,000. The changes also increase the timeframe to compromise the debt or apply to set aside the statutory demand to 6 months.
The reason for the changes is to give companies directly affected by the pandemic a short break from onerous debts.
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 new changes the minimum debt limit has been increased from $5,000 to $20,000. The Government has also increased the 21 day time limit to 6 months.
As with Statutory Demands, the logic behind the changes to bankruptcy notices is to give individual debtors breathing space.
The argument is that failure to implement these changes would lead to a significant increase to insolvencies and bankruptcies.
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.