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Dangers of Division 7A Loans In Liquidation

By Ashley Muscat, Law Clerk at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

It is common for associates and shareholders of companies in Australia to withdraw company funds through a loan account. There are lots of tax reasons why this is a popular way to access profits from a corporate vehicle. Of course, the ATO knows this, and so if the loan is not properly documented and does not satisfy the criteria to be a Division 7A loan, the amount will be deemed to have been paid out as a dividend, and taxed in the hands of the shareholder, usually unfranked. [...]  READ MORE →

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Challenging Demands

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Section 459G(1) of the Corporations Act 2001 (Cth) (“the Act”) allows a debtor company served with a statutory demand to apply to the Court to have it set aside. Under s 459G(2) any such application must be filed within the 21 day statutory limitation period. This is a strict 21 days and generally cannot be extended.

The operation of s 459G and the strict 21 days limit has led to some controversy in situations where a debtor company has been served with a statutory demand, but does not become aware of the service until after the expiry of the 21 day period. How could it file an application to set aside a demand it did not know about? [...]  READ MORE →

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Making Debt Collection Successful – The Key: Information!

By Jamieson Naylor, Law Clerk at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

If you are providing goods and services on credit, at times you may be required to engage in the process of debt collection. So, how can you make the debt collection process as streamlined and successful as possible? As you may have guessed, the key is information!

There are steps that can be taken and searches that can be conducted to obtain information surrounding a debt or debtor, and in our experience, the prospects of successfully recovering a debt greatly improve when a creditor has an abundance of information. The debt collection process will also generally be much cheaper and require less investigative measures. [...]  READ MORE →

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WHY JUST DO DEBT COLLECTION WHEN YOU CAN HAVE A DEBT COLLECTION LAWYER!

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

With the current economic crisis and the increase in the cost of living, debt collection is also on the rise. We have found that creditors are pursuing debt collection, no matter the quantum of that debt. Creditors are becoming less patient and less lenient with informal debt collection and want to see more formal, efficient and effective debt collection methods, sooner.

Debt collection by commencing proceedings tends to be the last resort in the debt collection process. However, in current times plenty of creditors have decided to skip the first few steps, and jump straight to formal debt collection. There are numerous creditors who are simply taking a much “harder” approach with debt collection and commencing proceedings from the “get go.” This can be an efficient and effective approach to debt collection, but it would be sensible not to apply a “one size fits all” approach to debt collection. Many of a creditor’s debt collection decisions should be made on a case-by-case basis, taking into account the debt collection sum, debt collection fees already incurred, and any known factors regarding the debt or the debtor which will make a particular debt collection method most effective. [...]  READ MORE →

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WINDING UP DEBT COLLECTION!

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Debt collection is winding up as interest rates increase and margins are squeezed.  Generally, creditors want a debt collection process which will recover the maximum amount of any debt for the least amount of work and cost.

Well, what debt collection short cuts are there? When reviewing your debt collection process, what other options exist besides litigation?

Debt collection should not be a “one size, fits all.” When formulating or reviewing your debt collection processes, make sure you understand the advantages and disadvantages of each debt collection avenue and tailor this to particular debt collection situation. A good debt collection system will factor in multiple issues such as the nature and amount of the debt, as well as the circumstances attitude and likely response of the debtor company. A good debt collection system will help you determine which debt collection avenue is appropriate. [...]  READ MORE →

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The Economic Storm – and How To Weather It

The Australian Tax Office (ATO) have reinvigorated their efforts in debt collection after a period of reduced collection over the pandemic. The ATOs post-pandemic debt collection campaign is characterised by recent surges in Director Penalty Notices (DPNs), an upswing in winding up filings, statutory demands and insolvency appointments. This, coupled with the challenging nature of the current Australian economy has hit businesses hard, especially in NSW, with insolvency appointments up 62 percent in the first half of 2022-23. [...]  READ MORE →

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Creditor Bankruptcy Notices: How to serve them correctly as a creditor

By Tiani Kasbarian, a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

What is a Bankruptcy Notice?

Under the Bankruptcy Act 1966 (Cth), a bankruptcy notice serves as a formal warning to a debtor who owes a judgment debt of at least $10,000. This amount was permanently raised from $5,000 in January 2021.

I am a Creditor who is owed money by a Debtor, how do I serve a bankruptcy notice?

A creditor must hold a judgment against the debtor for more than $10,000, and which was made within the previous 6 year period in an Australian Court. Foreign judgments may be able to be registered in Australia. Judgment debts older than 6 years may still be enforced but not using a Bankruptcy Notice. An application for a Bankruptcy Notice is made to the Official Receiver, through the Australian Financial Security Authority. [...]  READ MORE →

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Understanding and Fixing your Credit Status

By Anica Cunanan, a Solicitor of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group.

If you have ignored a Statement of Claim that has been served on you, the chances are that the person suing you is in the process of obtaining default judgment or may already have obtained default judgment against you.

After you have been served with the Statement of Claim, you will normally not get any notice of this step until the default judgment is being enforced against you. So what can you do about a default judgment? [...]  READ MORE →

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The Ruby Princess – Nothing “Cruisy” About Cruise Line Contracts

By Aritree Barua, Solicitor at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group.

In Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149, the Full Court of the Federal Court of Australia (“the Full Court”) examined the contractual and consumer law rights of the passengers who were aboard the vessel the “Ruby Princess” on its infamous Sydney-New Zealand-Sydney voyage on 8 March 2020 and considered whether contracts entered into by passengers with Carnival plc (“Carnival”) and its subsidiary, Princess Cruise Lines Ltd (“Princess”), contained unfair terms. [...]  READ MORE →

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HOW MUCH DID THAT COST?

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

With any debt collection service, such as a debt collection agency or a debt collection lawyer, the costs of debt collection can be significant. So the question we are always asked is ‘Can the debtor be held liable for my debt collection costs?’

As we tell our valued debt collection clients, there are at least a couple of different answers to this question. But critically, debt collection clients can take steps to get a better outcome in relation to their debt collection costs! [...]  READ MORE →

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Creditor Bankruptcy Notices: What do I do if I receive one?

Creditor Bankruptcy Notices: What do I do if I receive one?

By Tiani Kasbarian, a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

What is a Bankruptcy Notice?

The Bankruptcy Act 1966 (Cth) refers to a bankruptcy notice as a formal warning that is issued to a debtor who owes a creditor a minimum of $10,000 or more. This amount was permanently raised from $5,000 in January 2021.

The Notice requires a debtor to pay an amount within 21 days from the date it has been served. If they do not resolve the debt, the subject of the Notice within that 21 day period, the debtor has committed an ‘act of bankruptcy’, which the applicant creditor may rely upon in order to apply to the court for a sequestration order to be made against the debtor’s estate. [...]  READ MORE →

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CAN’T WE STILL BE FRIENDS? CUSTOMER RELATIONSHIPS AND DEBT COLLECTION

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

An effective debt collection system is critical to businesses who provide goods or services “on credit”. But how to go about debt collection whilst still trying to maintain good customer relationships?

In our experience, nothing poisons a business relationship like bad debt collection. At the risk of sounding heretical, sometimes the customer is not right, when they simply refuse to pay for no reason. The value of such customer relationship might be doubted, and the method debt collection may not matter. But in other cases, the customer just needs a gentle (or possibly less gentle!) debt collection technique. In all cases, the question is this: How does a business continue to manage a customer relationship whilst ensuring that their account is paid on time? [...]  READ MORE →