Can I still collect debts during the pandemic?

COVID-19 has caused significant financial difficulties for many households and businesses. In response, in March 2020, the Federal Government implemented emergency measures stop a tidal wave of bankruptcies and business insolvencies. But, contrary to public misconceptions, most conventional debt recovery strategies remain unrestricted.

What are the changes?

The following changes apply until 31 December 2020:

  • Bankruptcy notices, the precursor to bankrupting an individual, can only be issued for judgment debts of $20,000 or more (previously $5,000) and the time to comply with or challenge a notice has been increased to 6 months (previously 21 days).
  • Similarly statutory demands, the equivalent of bankruptcy notices for companies, can only be issued for debts of $20,000 or more (previously $2,000) and the time to comply with or challenge a demand has been increased to 6 months (previously 21 days).
  • Company directors can rely on new safe-harbour provisions from insolvent trading claims – although these provisions are technical and directors should take professional advice at an early stage if they intend to rely on them.

Most States and Territories have also restricted remedies for non-payment of certain debts, for example rent and other payments due under residential tenancies and commercial leases. Many of these measures are extraordinary and you should seek legal advice before taking any steps to enforce these types of agreements.

Can  I still collect my debts?

In many cases, yes. The changes do not affect your ability to pursue most debts through the court system. The PAID Debt Collection Process remains highly effective. The court processes have adapted to social distancing requirements with electronic document lodgement and the conduct of hearings by telephone or video link.

Judgment debts are able be enforced by means inquiries (including orders for the payment of debts by instalment) and the seizure and sale of personal and real property. Even during ordinary times, these are often the most effective strategies to collect debts.

Various State and Territory Governments have introduced special measures for certain types of debts such as rent due under commercial and residential tenancies. Those measures may affect your rights to pursue your debts and you should obtain legal advice about the options available to you.

Should  I continue to collect my debts?

There is no doubt that these are tough times for many in the Australian community. But while the health crisis is unprecedented, we commonly encounter people who cannot pay debts because of circumstances outside of their control, be it relationship breakdowns, soured investments, the loss of jobs or personal health issues.

In our experience, an empathetic and professional approach will often result in a solution that sees you paid without undue hardship to the debtor. When a debtor is prepared to engage in good faith, we are often able to negotiate a realistic payment plan.

The key continues to be to treat all debt collection as urgent – otherwise your debtor’s financial problems may become yours!

Updated: 24 September 2020

Photo by cottonbro from Pexels

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