New year, new opportunity to recover your outstanding invoices

The COVID-19 temporary relief measures which applied to insolvency have largely ceased as of 31 December 2020 and now is the perfect opportunity for you to reassess your debt recovery options.

There are a number of debt recovery options available to you, depending on whether you are collecting an outstanding debt from an individual or a company.

Individual

If an individual owes you monies, you can make an application to the Court and seek orders that the debtor pay you the outstanding debt together with the costs of you making the application. Depending on your payment terms, you may also be able to seek interest on the debt.

If the individual does not respond to the application, you will receive an order in your favour which you can serve on the induvial and request prompt payment.

If the individual does not comply with the order, you have various options to pursue, depending on the individual’s circumstances:

  1. Attachment of earnings application whereby you make an application for the individual’s employer to garnish the debtor’s wages and make payment directly to you until the debt is paid;
  • Attachment of debt application whereby monies owed to the debtor are garnished and paid directly to you, i.e. where the debtor receives rental income, you can make an application that the tenant pay all or a portion of the rental income to you until your debt is satisfied;
  • A warrant to seize their assets, such as a motor vehicle, which will be sold and offset from the debt owed to you;
  • An application for an oral examination whereby the individual will be ordered to attend Court and answer various questions to give you a better idea of their assets, income, employment status and their general financial position; or
  • An application for bankruptcy whereby the Court will appoint an administrator to consolidate the individual’s assets and payout their creditors.

Deciding which debt recovery options are available to you will depend on the financial position of the debtor. Please contact our office to obtain tailored advice for your particular circumstances.

Company

If a company owes you money, you can also make an application to the Court for orders that the company must pay you the outstanding debt.

Before you make this application, it may be appropriate to serve a statutory demand on the company. A statutory demand can be made where there is no genuine dispute between you and the company and the debt owed to you is more than $2,000. If you serve a statutory demand on a debtor company and there is a genuine dispute, you risk the debtor company making an application to set aside the statutory demand and you may be ordered to pay the company’s costs associated with making such application.

A genuine dispute includes the following:

  1. a dispute regarding the quality of goods supplied;
  2. a question regarding the quantum of the goods; or
  3. a dispute regarding the standard of the service provided.

To eliminate doubts regarding whether there is a genuine dispute, you can also make an application for an order from the Court first, then issue the statutory demand if the Court order is not complied with by the debtor company.

If it is not appropriate to serve a statutory demand, and the company has not complied with the Court order to pay the outstanding debt, you can make an application to the Court to wind up the company whereby a liquidator will be appointed by the Court to consolidate the assets of the company and pay out the creditors of same.

Deciding on the appropriate course of action will depend on the quantum of the debt owed to you and the financial position of the company.

Exemption

At present, temporary relief is available until 31 July 2021 to eligible companies suffering financial hardship.

The COVID-19 temporary relief measures are extended to companies who make a written declaration by 31 March 2021 on the Australian Securities Investment Commission’s published notices website announcing that they will likely become insolvent with 6 months.

Importantly, a company who makes the abovementioned written declaration will be afforded an extension of the $20,000 threshold and given 6 months to comply with a statutory demand. Therefore, you cannot serve a statutory demand on a company who has made the relevant declaration if the debt is less than $20,000 and the debtor company will have 6 months (rather than 21 days) to comply with the statutory demand.

This article is intended for informational purposes only. If you have any outstanding invoices carrying on from 2020, we recommend that you contact our office to obtain advice for your particular circumstances. Please telephone (03) 9853 0311 or email [email protected].