In this video, OMB Solicitors Senior Associate, Cameron Marshall explains how COVID-19 affects debt recovery in Queensland.
Good morning. My name is Cameron Marshall. I’m a Senior Associate at OMB Solicitors. I’m here today to talk about the subject of the impact of the unfortunate and terrible COVID-19 virus and how it might be affecting litigation matters.
You may be aware that recently the federal government has introduced new legislation which has impacted on the ability to enforce statutory demands and bankruptcy notices on debtors.
Many would be familiar with the process of issuing a creditor’s statutory demand as a way to help recover debts that are owed by companies. That process has now changed. The previous legislation under the Corporations Act required a statutory demand only to reach a threshold of $2,000 and the debtor had 21 days to respond to such a notice.
Now, under the new changes that have been implemented from 25 March 2020, the threshold has been increased to $20,000 before you can issue a creditor’s statute demand. And also, and importantly, the debtor has six months to respond, either making an application to set aside the creditor’s statutory demand or to comply with its terms.
Those changes obviously will change how a creditor will look to enforce debts owed to it. In respect to debts that are owed by an individual, a bankruptcy notice is often used. Again, the new changes that have been implemented by the federal government have changed these thresholds and time limits to respond like those that have been changed for the creditor’s statutory demand. In the case of a bankruptcy notice, the threshold has increased from $$5,000 to $20,000 and again, the time to respond has been increased from 21 days to six months for the debtor to respond.
Now, importantly, these time frames and changes only affect creditor statutory demands and bankruptcy notices that have been issued after the 25 March 2020.
So if ones are out there and have been served on you already, then you should act immediately as the old legislation will apply.
All right, so we know that the landscape has changed to a certain degree and that you won’t be able to enforce debts owed to you by using either a creditor statutory demand or a bankruptcy notice as quickly as you did before. That doesn’t mean that all things have ended in respect to pursuing debt or if you have been served with one of those documents that you don’t have to respond. What do you do if you get served either a bankruptcy notice or a creditor’s statute? Well, the first thing I would say is, just because you’ve got an extra six months to respond, you just don’t put it in the corner and don’t do anything. If you wish to continue to recover debts that are owed to you, you may still do so.
Firstly, you may wish to institute proceedings in the relevant court. Those procedures are still open to all parties.
Secondly, if you have a judgment that’s being awarded in your favor, you may still enforce it. You can enforce it through the procedures in Queensland such as the uniform several procedure rules. Those methods include processes such as garnishing money from bank accounts, garnishing wages, selling property and other various forms of enforcement. What has changed is that you can’t simply turn to a bankruptcy notice or an accredited statutory demand as quickly as you did before.
The final thing I’d have to say if you are fortunate enough to have a PPSR clause within your credit agreements or your contracts then you may look to enforce those provisions as well. At this stage, they’re not exempt from being enforced. Although the practical aspects of having to go recover assets in this difficult time may be an issue that you have to consider as well.
As a recap, the recent federal changes to the legislation have changed the landscape a little on how you may proceed to recovered monies owed to you. However, it doesn’t mean that all your opportunities have finished.
What I would do is come and see OMB Solicitors and we’re happy to discuss matters with you on how to recover debts or if you’re unfortunate enough that someone is chasing debt from you, you can come and see us and we will be able to guide you through that process also.