In this episode we discussed debt collection in the context of Covid-19 exploring some legal changes introduced by the government in response to the exceptional economic circumstances induced by the pandemic.
In this episode Matthew Karakoulakis shares some useful tips for business owners about some of the processes involved in debt collections.
He first underlined that businesses can protect themselves from getting embroiled in debt collection processes.
“If you do your due diligence in business, know your customers and follow tested processes you can avert the situation where you end up having to recover your money through the legal system.”
However, he emphasised that if all avenues have been exhausted you can see a lawyer or a debt collector.
Matthew highlights that because of the pandemic the government has introduced some significant changes to debt collection processes in many aspects including:
- Creditors statutory demands,
- The requirements for bankruptcy proceedings,
- The release available for directors,
- The provisions against trading whilst insolvent
- and temporary releases against initiating bankruptcy proceedings
He further explains that due to Covid-19, for creditors statutory demands to become enforceable the minimum amount has been increased from $ 2000 to $20000. That is ten times higher than what it used to be prior to the pandemic.
Also, for creditors statutory demands the time frame for a company to respond to that demand has been significantly extended. It used to be 21 days, now it is 6 months.
Matthew Karakoulakis underlined that the government has introduced some leniency in the system as it recognises ongoing financial difficulties.
These measures like most other exceptional decisions undertaken to curb the effects of Covid-19 will be revised after a six months period.
It is likely that they will be renewed after the initial half year period especially in case of an economic recession.