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Insolvency Relief Extended until New Years!

By Hayley Hitch, an Associate of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group


The Morrison Government earlier this year introduced the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) which came into effect on 25 March 2020 to provide relief to individuals and entities under the Corporations Act 2001 (Cth), Bankruptcy Act 1966 (Cth) and supporting legislation. These changes were due to expire on 25 September 2020, where the legislation was expected to revert back to its former position where, for example, statutory demands and bankruptcy notices required a 21 day response period.

You may recall our earlier blog which goes into some detail about these changes, this may be viewed here.

The Morrison Government has however today extended the operation of the relief provided (and described above) until 31 December 2020. This means that:

  1. Any statutory demands issued under the Corporations Act 2001 (Cth) on or before 31 December 2020 will need to provide the debtor with a period of 6 months to respond and be for at least $20,000;
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Debt Collection Sydney – Statutory Demands and the Expiration of the Coronavirus Economic Response Package Omnibus Act 2020 amendments

As a result of the COVID-19 pandemic, the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) was introduced, which resulted in various temporary changes to the Corporations Act 2001 (Cth) and Corporations Regulations 2001 (Cth) in respect of statutory demands.

These temporary changes include extending the time period for a company to respond to a statutory demand from 21 days to six months, and increasing the monetary threshold for a creditor to issue a statutory demand from $2,000 to $20,000.

These changes, which came into effect on 25 March 2020, are currently only applicable for a six month period which is due to expire on 25 September 2020. This means that any statutory demands served on or before 25 September 2020 must comply with the temporary changes.

Importantly, these changes only apply to statutory demands which are served between 25 March 2020 to 25 September 2020; not for debts which are incurred during the same period. This means that, on the basis that there are no extensions to these temporary amendments, a creditor can issue a statutory demand pursuant to the original requirements for debts incurred 25 March 2020 to 25 September 2020, as long as the statutory demand is served after 25 September 2020.
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Recovering costs for debt collection services

Recovering costs for debt collection services

Fees and costs, including legal costs and costs for third party debt collection services can only be collected from a debtor if there is an agreement between the creditor and debtor providing for those costs to be payable to the creditor. Attempting to recover costs in the absence of a clause in the relevant agreement can be misleading deceptive and conduct in contravention of section 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)), section 154 of the National Credit Code (Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth)) as well as Section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”).

This issue was raised in Australian Competition and Consumer Commission v Sampson [2011] FCA 1165 in which a solicitor was found liable for, amongst other things, asserting that debtors were liable for legal costs of $30 on top of the debt for unpaid video rental fees, when sending letters of demand and notices to customers of a video rental company. There was no entitlement for the video rental company to recover pre-litigation legal costs and so the Court found the statements made by the solicitor were misleading and deceptive.
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Clearing your debtor ledger – Get in touch with your not too friendly Debt Collection Lawyer!

By Hayley Hitch, an Associate of Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

Do you hate debt collection? Do you have a list of debt collection tasks that is getting longer every day? Have you been unable to accomplish the critical debt collection part of debt collection? If only debt collection were easier, and there was some way of moving those pesky debtors off the debt collection ledger! And don’t forget the cashflow side of debt collection – wouldn’t you like to have a bit extra cashflow back in your budget?

You need a Debt Collection Lawyer!

Matthews Folbigg assists clients with a range of debt collection services, including issuing letters of demand, negotiating settlements, negotiating instalment arrangements with debtors, and where the debt collection process requires, commencing court proceedings and enforcing judgments. We can also assist with debt collection before it even becomes debt collection – making sure you protect your interests by reviewing your terms of trade and where applicable, assisting with the registration of caveats, or personal property security registrations. Debt collection doesn’t need to wait until debts are overdue. We want to help you come through COVID-19 with a breath of fresh air and a tidy debt collection ledger.
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Responding to Debt Collectors

By Bonnie McMahon an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

If you receive a letter of demand from a debt collector, you might be wondering what you should do and whether you should respond to the debt collector. We have set out four helpful tips below which might assist you to respond to debt collector correspondence.

  1. Do not ignore the debt collector!

Whilst it might be daunting or scary receiving a letter of demand from a debt collector, you must ensure that you read the letter of demand and consider the claim being made against you. If you do not respond to the demand, it is likely that the debt collector may proceed with commencing proceedings against you. Debt collector proceedings and judgments can have unintended consequences, including being recorded on your credit profile, or leading to bankruptcy, so it is important that you take steps to deal with the debt collector’s claim as soon as possible.
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OPPOSING PREFERENCE PAYMENT CLAIMS AFTER COLLECTING MONEY

Claims by a liquidator for monies to be repaid to a company now in liquidation are unfortunately for most businesses a common event.  The good deeds done in collecting money can come undone and hurt your bottom line.

As a successful credit management team, you will have recovered monies that may have been received shortly before the debtor company was placed into liquidation, or the individual declared bankrupt.  This can then bring a new raft of issues should the liquidator or trustee be savvy enough to want the money back.

The reasoning behind the recovery of monies by a liquidator is to ensure that in the final days and months of a company prior to liquidation, monies paid by the company are paid equally to all of its creditors and that none are preferred over others.  Similar provisions apply in a bankruptcy matter.

Whilst this seems fair on its face, it does not assist those businesses that are diligent and actively take steps to ensure that their customers comply with the terms upon which they agree to abide by in receiving the goods and services provided.
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SHOULD I INSTRUCT A LAWYER FOR DEBT COLLECTION?

At Matthews Folbigg Lawyers, we have a team of lawyers and clerks ready, wiling and able to cater for your debt collection requirements.  Aside from being lawyers, members of our team have been involved in debt recovery for over 30 years, helping companies and individuals recover monies due and owing to them working with finance companies and mercantile agents seeing first hand the nuts and bolts of dealing with debtors.

This experience has given us a boost in assisting our clients to recover monies in-house up to the management of a full blown hearing where the debtor defends everything from non-supply of goods to alleging that the goods supplied were defective.  It also allows us to give you advice on the implications of debt collection, so you can make practical, commercial decisions.

Why should I use a lawyer for debt collection?” is a good question many may ask.  The answer is that in most cases you should not use a lawyer.  Most lawyers don’t have the X factor that will get a debt recovered as for most, debt collection is just one of many areas of law listed on the firm’s “We Do …” list on their webpage.
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DEBT RECOVERY – HOW FAR CAN YOU GO?

Any customer or client that owes you money outside of normal trading terms is an understandable source of frustration. That frustration is compounded when the individual company involved is clearly more than capable of paying, has not raised any issues with the quality of the products or services you have supplied, and is behaving as though non-payment of debts is a normal and acceptable part of doing business.

Even though the temptation is to adopt a non-compromising, even aggressive method of debt recovery in these cases, it is wise to stop and consider the restrictions imposed on debt recovery in NSW. If you fail to do so you may unwittingly breach legislation designed to protect debtors, and get yourself in more trouble than when you started – which I am sure will only make you even more frustrated!

Consumer protection laws in NSW and across the Commonwealth open up a minefield for those carrying out debt recovery. For example, before setting out to contact a debtor it is necessary for you to ensure:
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