Insolvency
Insolvency trading relief extended to 31 December
– is there hope for creditors? By Liam White*
Liam White
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Strategic methods for recovering overdue debts in the current climate The further extension of insolvent trading and insolvency relief laws to 31 December, 2020 has for some simply kicked the problem down the road and delayed the inevitable. On the other side, the rules are hindering businesses from being able to recover their bad debts. As the first extension was scheduled to come to an end on September 25, 2020, a large number of businesses were ready to take the necessary action to recoup unpaid debts, only to now need to go back to the drawing board to explore their options. The original temporary insolvency safe harbour rules increased the threshold for issuing Statutory Demands and Bankruptcy Notices to a minimum debt amount of $20,000, up from $2,000 and $5,000, respectively. The rules have also extended the length of time for debtors to respond to any Statutory Demand or Bankruptcy Notice to six months. In addition to this, the new safe harbour rules continue to temporarily protect directors from any personal liability for insolvent trading during this period. “The extension of these measures will lessen the threat of actions that could unnecessarily push businesses into insolvency and external administration at a time
CREDIT MANAGEMENT IN AUSTRALIA • October 2020
when they continue to be impacted by health restrictions,” Treasurer Josh Frydenberg said in a press statement. The goal of the extension is “to help prevent a further wave of business failures before they have the opportunity to recover,” not to entirely save businesses from eventual financial collapse. Some healthy businesses – those who were able to continue to operate and earn despite the lockdown restrictions – currently face difficulties in recovering delinquent accounts, some of which were incurred long before the COVID-19 pandemic began. The question on the minds of these businesses is this: Are we left with no recourse but to wait until the moratoriums are lifted? Below we try to answer this question as there is light at the end of the tunnel and there are a number of ways in which we have been able to achieve a satisfactory outcome for both the creditor, and the debtor.
3 proven strategies available for Creditors to recoup debts at this time Note: It must be emphasised that these options are only ever considered where we have exhausted all other avenues of either a repayment plan, a settlement for a reduced sum, or are simply being ignored after numerous contact attempts have been made.
