Friday, 15 May 2020

Debt Recovery During COVID-19

You may have heard of recent changes to bankruptcy and insolvency laws due to COVID-19 and be asking yourself, can I still recover debts owed to my business during this time? The answer is yes. In fact not only can you work with a debt collection agency to proactively manage debt collection, but it’s also in the best interest of both your business and the financial wellbeing of your debtors.

The legislation changes only impact one piece of the debt collection puzzle. There is still a great deal of debt recovery action that can be taken to manage your uncollected debt during this time. While some individuals and corporations have been financially impacted due to the economic restrictions imposed in recent months, many businesses and individuals are still in a position to manage their debts.

The Federal and State Governments have invested in record levels of stimulus programs which have kept millions of Australians in employment who would have otherwise been adversely affected by the pandemic. For the majority of debtors, their ability to enter into payment arrangements for repaying their debts has remained mostly unchanged.

What Changes Has The Australian Government Made To Insolvency Laws During COVID-19?

Changes to corporate insolvency laws regarding the serving of Statutory Demands and personal liability for company directors were passed in both Houses of Parliament on the 23rd of March 2020. They are contained in Schedule 12 to the Coronavirus Economic Response Package Omnibus Act 2020. The changes to legislation are temporary and are in effect for 6 months from the 24th of March 2020.

  1. Statutory Demands can only be served against companies for debts exceeding $20,000. Previously the minimum threshold was $2,000.
  2. Companies now have 6 months to comply with a Statutory Demand, instead of the previous time limit of 21 days.
  3. Directors will be temporarily relieved from the risk of personal liability for insolvent trading, where the debts are incurred in the ordinary course of business.

What Bankruptcy Law Changes Have Been Implemented During COVID-19?

Updates to legislation regarding personal bankruptcy laws and the serving of bankruptcy notices were also made in the Act. These changes are also temporary and in effect for the same period of time.

  1. the minimum threshold for initiating bankruptcy proceedings has increased to $20,000 from the original threshold of $5,000.
  2. The 21-day time limit for responding to a bankruptcy notice has been increased to 6 months.
  3. If a debtor responds to a bankruptcy position by declaring the intention to present a debtor’s petition they now have 6 months of protection rather than 21-days.

What Do These Insolvency and Bankruptcy Law Changes Mean For Debt Recovery?

These changes to Insolvency laws do not stop you from proactively managing your debt collection and recovering monies owed.

For corporate debtors, the temporary changes only impact your ability as a creditor to issue a Statutory Demand to a company under Section 459E of the Corporations Act 2001. A Creditor’s Statutory Demand is a legal notice served to a corporate debtor for undisputed debts, which if unpaid in the allotted time frame force the company into insolvency.

Likewise, for individual debtors, a similar process can be followed to reclaim unpaid debts where there is proof of the debt and the amount in question is above the threshold. A bankruptcy notice needs to be founded on a court judgement. These initial proceedings aren’t impacted by the changed thresholds. The difference is an individual or corporate debtor now needs to owe a minimum of $20,000 before a Creditor’s Statutory Demand or Creditor’s Bankruptcy Notice can be applied for.

Can I Still Recover Debts During COVID-19?

Yes. If debt recovery isn’t managed through this time, many debtors will find themselves in much worse financial positions after the fact. Instead of risking their own solvency by freezing or setting aside debt, smart creditors are working fairly with debtors to keep consistent payment histories, protecting both parties’ interests. The key is to work with a debt collection agency that is sensitive to the needs of people during this time and also experienced enough to know when a debtor has not been affected and is still in a position for more assertive debt recovery action.

Even debtors who have experienced some financial hardship due to COVID-19 are often able to continue a payment history with their debtors through skilful negotiation carried out by Pro-Collect. Debt collection during COVID-19 is not just about keeping your business viable. It’s also looking out for the best interests of debtors who will end up with unpayable debts and be forced into bankruptcy or insolvency if they don’t find a fair and manageable way through this time.

How Pro-Collect Can Help You

Pro-Collect has over 35 years of industry experience successfully recovering debt for our clients. We tailor our approach to perfectly fit the specific circumstances of your business and the profile of each debt recovered. We are experts in negotiating debt and action requests immediately. We are continuing to successfully recover debts for our clients throughout the COVID-19 pandemic period in Australia.

Here are some more benefits of working with Pro-Collect:

  • No collection. No commission.
  • No hidden fees, account loading or ongoing contracts.
  • No legal fees charged.
  • No debt too small or too large.
  • Your own dedicated account manager.
  • Same day instant action.
  • 24hr online access to your account.
  • 35 Years of experience in debt collection.

You can read more about our debt collection process in this blog article – “The Pro-Collect Debt Collection Approach”.

To speak with one of our friendly and knowledgeable debt collection professionals, please contact us today to discuss your needs. We look forward to being of service to you!

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