Written by Kyle Rowston-Wolcott.
The temporary changes made by the Government will delay any new bankruptcy proceedings or debt recovery claims against corporations for the next 6 months.
For the next 6 months…
The minimum amount to issue a bankruptcy notice has increased from $5,000 to $20,000
The time to respond to a bankruptcy notice has increased from 21 days to 6 months.
The period of temporary protection from unsecured creditors for people who lodge a Declaration on Intention to Present Debtors Petition has been extended from 21 days to 6 months – note: such a lodgement may be used by creditors to make you bankrupt.
Considering Bankruptcy?
If you are facing the possibility of bankruptcy, a creditor cannot make you bankrupt unless their claim is over $20,000. Further, if the creditor obtains a judgment, then you will have up to 6 months to respond to a bankruptcy notice that they issue.
Bringing Bankruptcy Proceedings?
If you are trying to bankrupt someone, you must have a judgment over $20,000, and the debtor will have 6 months to respond to a bankruptcy notice that you issue.
Considering Voluntary Bankruptcy?
If you want to enter into voluntary bankruptcy and you lodge a Declaration on Intention to Present Debtors Petition, you will have up to 6 months of protection from any claims made by unsecured creditors. At any time up until that date you can declare bankruptcy, after which a creditor can apply to make you bankrupt.
Please note:
- A failure to respond to a notice of bankruptcy is a common act of bankruptcy.
- Once this temporary 6-month period has passed your creditors may apply to make you bankrupt.
If you are a creditor then it can be a challenge to recover a debt from an insolvent individual, and if you are insolvent or have an insolvent partner you should be aware of the options available to you, including those under the Bankruptcy Act.
The contents are for informational purposes only and do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.
There are several strategies that can take advantage of these new laws and help extend the continuation of your business during these times.
Uther Webster & Evans can provide you with advice and assist you with your commercial and personal affairs.