From 1 January 2021, bankruptcy law changes introduced at the beginning of the COVID-19 pandemic will cease. These measures were introduced to support businesses who would have otherwise become insolvent. Here are the three most important takeaways from these changes:
1. The minimum amount of debt that can trigger bankruptcy has been reduced
During the pandemic, the minimum amount of debt owed was increased to $20,000.00. The requisite amount owing which allows a creditor to apply for a bankruptcy notice has since been reduced to $10,000.00. It is important to note that this amount is double than the pre-pandemic limit of $5000.00.
2. The amount of time an individual has to respond to a bankruptcy notice is reduced
A bankruptcy notice is a formal demand from a creditor to pay them the money you owe. Between March and December 2020, the amount of time that an individual had to respond to a bankruptcy notice was six months. This has now been slashed to just 21 days.
3. The temporary debt protection period is reduced
Temporary debt protection prevents any unsecured creditor from taking enforcement action against you. Once a person applies and is approved for temporary debt protection, they are afforded 21 days of protection. This is reduced from the six months protection given during the height of the pandemic.
As these changes have only recently come into effect, it is important that you are aware of your obligations. Failure to take note may result in drastic consequences for you or your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.