2020 had seen a flurry of changes to bankruptcy legislation in the wake of COVID-19. As of March 2020, the Federal Government introduced new amendments to bankruptcy laws to better protect debtors. The amendments to these laws largely surrounded bankruptcy notices – the mechanism used by a creditor in order to make a debtor bankrupt. A bankruptcy notice is a key step in enforcement of a judgment debt. It is the first step to make an individual bankrupt for a debt owing to a creditor.
Among these amendments, a temporary threshold amount change to bankruptcy proceedings was introduced – increasing the threshold amount of the debt required to issue a bankruptcy notice from $5,000 to $20,000. The changes also included an extension of time to comply with the bankruptcy notice once served on debtor, from 21 days to 6 months. These measures were initially set to end in September, 2020 but were extended to 31 December 2020.
With the expiration of these amendments, it was envisaged that the threshold amount would revert back to the pre COVID-19 amount of $5,000. However, the bankruptcy legislation was amended further by the Federal Government to introduce a new minimum threshold amount of $10,000. Therefore, as from 1 January 2021, a creditor can issue a bankruptcy notice only if their debt is $10,000 or more.
In addition to the threshold amount change, debtors now have once again only 21-days to respond to a Bankruptcy Notice. If a debtor fails to comply with the Bankruptcy notice within the 21 days a Creditor’s Petition can be issued at the end of this period and proceed to make a debtor bankrupt.
If you are seeking assistance or advice as a creditor or debtor, our office is ready and able to assist on (02) 9281 0013, or submit an enquiry via our Contact page.