In March 2020, a number of changes to bankruptcy and insolvency laws were introduced to assist individuals and businesses impacted by the economic downturn caused by the COVID-19 pandemic. Those protections were designed to reduce the threat of legal action against individuals and businesses in financial distress, providing opportunity to survive the anticipated economic downturn.
As of 1 January 2021, those temporary protections have ceased, and while we are relatively “back to normal”, another round of changes to bankruptcy thresholds have been put in place.
Here’s what you need to know:
- The minimum amount of debt needed to issue a bankruptcy notice is now $10,000 (down from $20,000 but up from the pre-Covid $5,000).
- The amount of time an individual has to respond to a Bankruptcy Notice has returned to 21 days (down from 6 months).
- The minimum amount of debt needed to issue a statutory demand has returned to $2,000 (down from $20,000).
- The amount of time a company has to respond to a statutory demand has returned to 21 days (down from 6 months).
How are Australian businesses going?
December 2020 saw the Australian Securities and Investments Commission record the first increase in the number of companies entering external administration since dramatic falls experienced in March 2020. This trend is expected to continue into 2021.
Undoubtedly most creditors will recommence their pre-Covid debt recovery processes and will be more likely to issue statutory demands and bankruptcy notices where debts are well overdue.
What does this mean for you?
If you need assistance in pursuing unpaid debts, there is now a broader range of resources available to you that may assist in recovery of those debts.
Alternatively, if you receive a Statutory Demand or a Bankruptcy Notice, you now have a very short time period to act, failing which you may open yourself to further steps which will see you become insolvent.
How can we help?
We advise business owners and individuals alike in navigating the insolvency laws.
Talk to us today if you need trusted advice about what is new in insolvency regime, including advice on navigating bankruptcy and corporate insolvency.