As some of you would be aware, in March 2020 the Federal Government introduced various COVID relief measures. These included temporary protection for individuals and Companies against action being taken by creditors.
In both instances the monetary thresholds were increased to $20,000 and the timeframes which a defendant had to respond were increased to 6 months. Well as of 1st January 2021 this is no more.
For Companies the timeframes and thresholds have reverted back to how they were. So the limit for issuing a statutory demand is $2,000 and the timeframe for a Company to respond is 21 days.
For individuals, the government passed a small change to the bankruptcy regulations which increased the amount which a creditor can seek a bankruptcy notice on, from $5,000 to $10,000. The timeframes to respond have returned to the normal 21 days.
With the extended timeframes and values, creditor recovery action on outstanding debts was quiet last year. In fact, corporate insolvencies were down 50% year on year in the September quarter alone. I believe the lack of creditor litigation along with government support was a substantial reason for this.
However, in speaking with lawyers and debt collectors in my network they have all been saying the same thing recently. They are ready to go once they return from their Christmas breaks, with several having already drafted the claims for clients. I expect a rapid increase in creditor recoveries, including the ATO, in the coming months.
In my experience, individuals and directors often wait until a claim is lodged with the courts to seek help. Unfortunately, this limits their options and also can result in the creditor being less willing to negotiate or settle as they feel the time has passed. Furthermore, once lawyers or debts collectors are engaged there are more costs involved, so the settlement amount may increase.
If left to run its course a liquidator or bankruptcy trustee could be appointed. At which point the affairs of the Company or individual are out of their control.
At Griffin Solvency Solutions we can often negotiate outcomes with creditors which the directors or individuals can’t. If the situation is a little more dire then I will work with you to discuss the alternative outcomes and formulate a strategy with your best interests at its heart.
Being proactive with creditors or taking steps early will generally always get better results. If you have Clients, or are in financial distress yourself, please do not hesitate to contact me for a confidential, no cost conversation.
