Debt Recovery and COVID-19
Unrecovered debt can have a serious impact on the efficiency and the cash flow of a business.
During these challenging times, it is important to be aware of the debt recovery options available which ensure both individuals and businesses collect the money they are owed.
Why covid-19 has impacted debt recovery
The range of temporary relief measures implemented by the government at both a state and federal level has created many uncertainties about owing legal obligations. What is more, some individuals have taken advantage of this widespread confusion to negate their legal obligations during this uncertainty.
This is particularly evident in the commercial leasing sector where moratoriums on evictions and other rental relief schemes encouraged by the government has led to refusals to pay rent and rent reductions without adequate disclosures of financial records.
Additionally, changes to bankruptcy and insolvency laws introduced earlier this year have made it more difficult for those seeking remuneration. This is because the changes largely increased the threshold for creditors can serve statutory demands and time frame for debtor to respond to such demands from 21 days to six months.
Recovering debts during covid-19
Those who are owed money by a debtor during covid-19 may still be able to recover this money through a variety of enforcement measures.
This can include:
- Issuing a letter of demand
- Filing an originating process in the New South Wales Courts to obtain a simple judgement for that debt
- Summoning a debtor for oral examination at court to explain their financial position
- Obtaining a judgment against debtors
- Applying for a freezing order to prevent the debtor from disposing of assets
Where a debtor does not pay after judgement is made against them, one may recover debt through seeking:
- A garnishee order of the debtor’s wages to redirect their earnings of the debtor from the employer to the creditor
- A court order to size the debtor’s real or personal property
- Bankruptcy (for an individual) or winding up proceedings (for a company).
It is important to note that there are steps businesses can take to ensure they do not incur further outstanding debts including seeking legal advice and drafting binding agreements.