- increased the monetary threshold at which creditors can issue a Bankruptcy Notice to $20,000; and
- increased the time period in which a recipient of a Bankruptcy Notice has to respond to a Statutory Demand from 21 days to 6 months,
have now been extended until 31 December 2020.
CLICK HERE for a press release issued by the Treasurer on 7 September 2020.
This is an important development as many creditors have been holding-off on issuing a Bankruptcy Notice pending the end of September when it was expected that the rules would revert to the previous position. However, the Government has now extended the temporary measures until the end of this year, which means the strategies to hold off on enforcement action via these means might now need to be revisited.
It is yet to be seen if the recent announcement assists overall, or perhaps results in some bigger insolvency related issues early next year (assuming no further extensions are made to these regulations).
That said, we consider that there are other enforcement/recovery strategies which we have implemented, which have proven to be effective in many cases since the temporary measures were introduced. This is especially relevant to body corporate managers who manage schemes where some lot owners default on their obligation to pay their body corporate levies.
We believe this unpaid body corporate levies, especially for investor lot owners, will become a big issue over the next 3-12 months. Bankruptcy proceedings are generally an effective way of obtaining payment for unpaid levies from lot investment lot owners.
We have previously had a lot of success in obtaining payment of unpaid body corporate levies from bankruptcy proceedings, including a seminal Federal Court decision which we obtained in the Federal Court in 2018.
This binding decision means that body corporate levy recovery costs in bankruptcy proceedings are assessed in accordance with the body corporate legislation, rather than the Federal Court legislation, meaning that for the whole body corporate industry a much higher amount is claimable for recovery costs in such matters.
CLICK HERE for our original newsletter regarding that decision and its important ramification for the body corporate industry as a whole.
If you wish to discuss possible strategies we could implement for any particular body corporate matter, please don't hesitate to get in touch today.