COVID-19 has drastically impaired all sectors of the global economy, but travel, hospitality and retail have been hit the hardest. Businesses across all sectors are struggling, and many are finding themselves in a range of financial difficulties. Victoria alone has been estimated to reach $60 billion of debt by 2021. Accordingly in March 2020, the Federal Government made amendments to insolvency and corporation laws, contained within schedule 12 of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth), to alleviate financial stresses on small to medium businesses.
Temporary measures were also put in place to aid individuals negatively impacted by the COVID-19 pandemic, including JobSeeker payments, early access to superannuation, rent assistance and renegotiation of a mortgage. The Australian Government also increased the threshold for creditors to serve bankruptcy notices from a judgment debt of $5,000.00 to $20,000.00 and increased the periods for debtors to respond to such notices from 21 days to 6 months. This was achieved by introducing amendments to the Bankruptcy Act 1996 (Cth) which will stay in effect until 31 December 2020. In addition to these, the Australian Taxation Office has announced that it is open to entering into arrangements with taxpayers where necessary to withhold enforcement actions against them for failure to make payments.
Since the introduction of these measures, many debtors are citing COVID-19 hardship to avoid paying debts even when debts arose before COVID-19. This has made it even harder for many to recover debts from companies and individuals, which has ultimately increased their credit risk and overall financial instability.
If you are owed money by a debtor who is unreasonably taking advantage of the COVID-19 pandemic, and there is no factual basis to their claims, you should seek legal advice in issuing an originating application to obtain a simple judgment for that debt.
The team at Midwinters Lawyers are ready to assist you with all your legal matters.