Debt Recovery Update in the Time of Covid-19

By 11 November 2020Insolvency
Debt Recovery

What are my debt recovery options?

Unless you hold security, your debt recovery options will depend on what type of entity owes you the debt, the value of the debt owed to you, and the terms of your contract or agreement with the debtor.

Who owes you the debt?

  1. An individual, including an individual trading with an ABN; or
  2. A Pty Ltd company.

An Individual

Your options are:

  1. Send a letter of demand for payment.
  2. Commence legal action by filing an application with the Queensland Civil and Administrative Tribunal (QCAT) if the debt is considered a minor civil dispute and the value of the debt is under $25,000.
  3. Commence legal action by filing a claim and statement of claim with the relevant Court depending on the value of the debt, as follows:
    • Magistrates Court – Debt up to $150,000;
    • District Court – Debt between $150,000 – $750,000; or
    • Supreme Court – Debt more than $750,000.

In the event you obtain a Court or QCAT judgment that is not paid, you can then take steps to enforce the judgment and recover your money.

Enforcement options can include commencing bankruptcy proceedings against the debtor if the judgment obtained from the relevant Court is for more than $20,000. The $20,000 threshold (increased from $5,000) applies until at least 31 December 2020 because of the COVID-19 protection measures introduced by the Federal Government.

A Pty Ltd Company

  1. If the debt owed to you is at least $20,000 or more (increased from $2,000 because of the COVID-19 protection measures introduced by the Federal Government), then the debtor company may be insolvent and you are entitled to issue a Creditor’s Statutory Demand (Demand).
    .
    The Demand process should only be used if there is no genuine dispute about the existence or the amount of the debt you are owed by the debtor company.  The Demand, once served, presently gives the debtor company a strict limit of 6 months (increased from 21 days because of the COVID-19 protection measures introduced by the Federal Government) to:
    • pay the amount of the debt stated in the Demand; or
    • come to agreed terms with you for payment of the debt; or
    • file and serve an application in Court to have the Demand set aside.

If the 6 months allowed lapses and the debtor company has not exercised one of the above options, then it is presumed to be insolvent, and you are entitled to commence winding up proceedings based on this presumption.
.
The COVID-19 changes to the Demand process apply until at least 31 December 2020.

  1. Commence legal action by filing an application with QCAT if the debt is considered a minor civil dispute and the value of the debt is under $25,000.The COVID-19 protection measures introduced by the Federal Government do not affect a creditor’s right to commence legal proceeding in QCAT.
  1. Commence legal action by filing a claim and statement of claim with the relevant Court depending on the value of the debt, as follows:
    • Magistrates Court – Debt up to $150,000;
    • District Court – Debt between $150,000 – $750,000; or
    • Supreme Court – Debt more than $750,000.

The COVID-19 protection measures introduced by the Federal Government do not affect a creditor’s right to commence legal proceeding in the Courts.

Other Considerations

Sometimes your terms of trade, contract or agreement with the debtor (individual or company) may include a charging clause or a personal guarantee.  Should that be the case, you will usually be in a better position to recover your debt, and have additional options to those outlined above.

Should you be a secured creditor, having, for example, a mortgage registered over the debtor’s land, or a properly registered security on the Personal Property and Securities Register over the debtor’s personal property, then you should obtain legal advice as to enforcing that security to recover your debt.

If you wish to pursue a debt, or you would like legal advice regarding the above, then please contact our debt recovery experts at Murdoch Lawyers on (07) 4616 9898.

This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.

    Contact Information

    Direct Line: 07 4616 9818