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How long do you have to comply with a Bankruptcy Notice or a Statutory Demand?

In March 2020, the Australian government enacted the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (‘the Act’). The Act eased the burden on individuals and businesses financially.

On 7 September 2020, following a joint media release from the Hon Josh Frydenberg MP (Treasurer) and the Hon Christian Porter MP (Attorney General & Minister for Industrial Relations), the temporary insolvency and bankruptcy protections were extended to 31 December 2020. The statutory limit, and time for compliance, of a Bankruptcy Notice or a Statutory Demand served between 25 March 2020 and 31 December 2020, is as follows:

COVID-19 (25 March – 31 December 2020)1 January 2021 onwards
Compliance timeframeBankruptcy Notice6 months from the date of service21 days from the date of service
Statutory Demand6 months from the date of service21 days from the date of service
Amount of the Judgment DebtBankruptcy Notice$20,000$5,000
Statutory Demand$20,000$2,000

The temporary protection from insolvent trading was also extended until 31 December 2020.

Creditors can commence proceedings in circumstances where a debtor has failed to comply with a Bankruptcy Notice or a Statutory Demand within the specified timeframe. Creditors may file a Creditor’s Petition seeking an order that the debtor be made bankrupt, or that a debtor company be wound up.

Alternatively, creditors may hold off serving a Statutory Demand or a Bankruptcy Notice until after 31 December 2020, as the debtor would only have 21 days to comply with same. However, although these protections are set to end on 31 December 2020, they may also be extended again at the behest of the Australian Government.

With these temporary protections in place, early professional debt recovery or insolvency advice may assist you and your business to be better off in six months time. Please contact our office to obtain such advice relevant to your specific circumstances.