Credit Management
The place for legal action and enforcement in the post-COVID-19 world By Roger Mendelson*
Roger Mendelson
During the COVID-19 period (which is not fully over by any means), legal action was very largely placed on hold. Although there were no restrictions during the period from March 2020 until January 2021 on taking out legal action, there were difficulties if an action became defended and a general feeling by creditors of “let’s put this on hold”. Many creditors had a policy to not undertake any action which was likely to upset debtors or which may lead to adverse publicity. In the circumstances, I am unaware of any adverse publicity arising from legal action over the whole COVID-19 period. There were restrictions placed on issuing Statutory Demands and on Bankruptcy as an enforcement tool. Statutory Demands had a temporary increase in the amount owing from $2,000.00 to $20,000.00 and the time period for response by the company was increased from 21 days to 6 months. The bankruptcy minimum judgment amount was increased to $20,000.00 and the response time to respond after service of a Bankruptcy Notice was increased from 21 days to 6 months.
38 CREDIT MANAGEMENT IN AUSTRALIA • July 2021
Needless to say, few creditors undertook either of these options during the COVID-19 period. The restrictions were changed in January 2021. The bankruptcy minimum judgment amount is now $10,000.00 (including costs and interest up to the date of the judgment) and the response period after service of a Bankruptcy Notice has been returned to 21 days. Statutory Demands can now be issued for any amount owing by a company which is not subject to dispute of over $4,000.00 and the response period after service of the Statutory Demand is now 21 days. It is apparent from the bankruptcy and wind-up figures that numbers have dropped very substantially and have not caught up in any way to preCOVID-19 levels. This means that there is either a back log brewing or another more likely explanation, is that many creditors are simply shelving action on prior claims.
What is the future of legal action in credit and collections? There is no doubt that legal action is being used to a much lesser degree now than say 10, 20 or 30 years ago. Going back 30 years, legal action
