6 changes to protections for bankruptcy and debtors in light of COVID-19
In response to the significant impact COVID-19 is having on individuals and businesses across Australia, the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) has been enacted to provide an economic response and deal with other matters relating to the coronavirus.
Schedule 12 deals with temporary relief for financially distressed individuals and businesses, including the following temporary changes to bankruptcy notices and creditors’ statutory demands:
Increase in the minimum amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings against a debtor from $5,000 to $20,000;
Increase in the timeframe in which a debtor must comply with a bankruptcy notice from 21 days to 6 months;
Increase in the timeframe in which a debtor is protected from enforcement action by a creditor following presentation of a declaration of intention to present a debtor’s position from 21 days to 6 months;
Increase in the statutory minimum for a creditor to issue a creditors’ statutory demand to a debtor from $2,000 to $20,000;
Increase in the statutory timeframe in which a debtor must respond to a creditors’ statutory demand from 21 days to 6 months; and
Directors have a temporary relief from personal liability for insolvent trading if debts are incurred in the ordinary course of business.
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The above information is a summary and overview of the matters discussed. This publication does not constitute legal advice and you should seek legal or other professional advice before acting or relying on any of the content.