The Australian Government has temporarily changed bankruptcy law to help protect people who are facing unmanageable debt as a result of the economic impacts of COVID-19.
If you’re a sole trader, or operating a business as a partnership, you could face personal bankruptcy if you can’t pay your debts.
If you’re in financial difficulty you can now apply for temporary debt protection; this prevents recovery action by unsecured creditors for six months. You can use the time to:
- Change your habits, stop spending so that you don’t solve on crisis and create another. This can also mean a change of culture.
- Seek help for those things that may have caused your problem. If you gamble start by getting rid of the betting app.
- Be honest about your situation with those around, but do not ask them to bail you out if you haven’t changed your spending, financial and monetary habits and culture.
- Consider negotiate payment plans with creditors if it makes sense, often things like part 9 and 10 arrangements are just another form of burden.
- consider whether you require a formal insolvency option. Sometimes declaring bankrupt and just getting on with your life is a massive relief. You can still trade under an ABN.
In addition, the temporary debt relief measures have increased the:
- minimum amount of debt that can trigger bankruptcy (from $5,000 to $20,000)
- time an individual has to respond to a Bankruptcy Notice (from 21 days to six months) – but if it’s clear you are never going to pay the debts you are best to start the 3 year journey now. You are better to jump, than be pushed.
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