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DEBT RECOVERY DURING A PANDEMIC

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During these unprecedented times, cashflow may be prompting you to act on any outstanding debts owing to you, or that are owed to you. Perhaps you have noticed that clients or customers are slower to pay during their own cashflow problems. Regardless of the situation, if you are wondering what options are available to assist in recovering money so your business can stay afloat, here are some options to consider.

Letter of demand
A letter of demand is almost always the first step to take when trying to recover a debt, and coronavirus has not changed this. In times like these when businesses are struggling, MDL may be able to assist in negotiating a payment plan with your creditors to avoid costly court proceedings and unnecessary legal costs.

Court proceedings
Where a letter of demand fails, the courts are still open and accepting court documents. Some courts are adjourning non-urgent hearings, and some enforcement options have been put on hold, however, most matters are proceeding as usual. We can advise how these changes affect your situation specifically, and whether commencing proceedings is an option for you.

Most importantly, we can assure you that we have processes in place to ensure that we can continue to file court documents and attend court hearings.

Statutory demands
A Statutory Demand is used when a company owes you or your business money, and you believe they have not paid as they may be insolvent. A Statutory Demand should not be used as a standard ‘debt recovery tool’ and should only be sent to a company if you have a genuine belief that they are insolvent.

Usually, the minimum debt owing to warrant a Statutory Demand is $2,000, and a company has 21 days to respond. However, due to the current situation, amendments have been made to legislation to increase the debt amount to $20,000 and companies now have six months to respond to a Statutory Demand.

Bankruptcy notice
Similarly, to Statutory Demands, amendments have been made to legislation to extend the timeframe to respond to a Bankruptcy Notice from 21 days to six months. This means if you serve a bankruptcy notice on someone you have judgment against, you will not be able to make to application to the court to have them declared bankrupt until six months after you serve the notice. Further, the minimum debt owing to institute bankruptcy proceedings has been increased from $5,000 to $20,000.

Sometimes it’s best to wait
At MDL, we want to assist in achieving the best, and most cost-effective outcome for you. This could mean waiting until the pandemic is over before you take any action with respect to unpaid debts. If you are owed money by a business that has been forced to close due to the government restrictions, it is possible they simply won’t have the cash flow to repay debts until the business is open again and making an income. In this situation, and especially in circumstances where the debtor has admitted they owe the debt, it may be best to wait until the pandemic is over and the business is generating an income again.

Time limits
It is key to keep in mind that a pandemic does not change a time limit that may already apply. In most situations, you will have six years to commence proceedings to recover a debt owed to you. If you want to commence proceedings after this time limit has expired, you are required to seek leave (permission) from the court to do so. It can be very difficult to obtain the court’s permission to commence proceedings out of time, and while the courts are still accepting new matters, the current pandemic will not be an acceptable reason to extend time limits.

Time frames may be different depending on the type of debt, so it is important that you seek advice for your specific circumstances.

How can the team at MDL help?
Our experienced litigation team can provide you with tailored advice to help you decide what the best option is for you and your situation.
If you need assistance recovering any debts owing to you, or you require assistance in reviewing your agreements and processes to ensure you have a plan in place for the future, contact Ben Schefe (Litigation Director) on 07 3233 9923.

We have assembled a highly experienced, capable team of legal practitioners, committed to delivering you expertise across all legal services. Find your local office: