Are you worried about being able to collect debts during COVID-19?
While the Australian government has put in place changes to the debt collection process until September 2020, that does not mean that creditors cannot collect from debtors during this time period. The majority of these measures were put in place to protect debtors from being forced into bankruptcy; not for the purpose of eradicating payment of their debts in their entirety.
If you have outstanding debts from a business loan or the delivery of product, you can still collect on those debts. Small businesses who depend upon the collection of outstanding debts to survive do not have to completely forgo collections. The Court system remains open as a viable option. A claim for outstanding debt can still be filed in these three courts;
- The Small Claims Division of the Local Courts; the monetary ceiling for hearing cases in this court is $20,000.00
- The General Division of the Local Court; the monetary ceiling for hearing cases in this court is $100,000.00
- The District court for claims under $750,000.00
- Supreme Court of New South Wales for claims that exceed $750,000.00
Each of these courts still allows for claims to be filed and the process to play out.
However, there are additional alternatives that are less costly and possibly equally, or more, effective. The first step in attempting to collect outstanding debt during this difficult time would be to personally contact the debtor. A great deal of time and money can be saved by both parties via a conversation. Once you have agreed to speak with one another remain open to the idea of informal negotiations and take into consideration the following;
- The current financial situation of the debtor
- The possibility of collecting a smaller portion of the debt for a short period of time
- Incrementally increasing the percentage of collection on the debt as the economy begins to open up again
- Restructuring the debt by means of an alternative contract
- Extending credit for a limited period of additional time
- Considering interest only payments for a defined period of time
If you and the creditor find that any of these ideas are viable, you can proceed to make a new arrangement, in writing, that everyone can abide by for the time being.
However, if you cannot come to an agreement on your own, the parties might want to consider using a neutral third party mediator to help find a solution. By bringing your ideas to a mediator, and being open to the solutions a third party might impart, it is still possible to come to an agreeable compromise that will allow the debt to be collected and the creditor’s business to continue to operate.
In order for any of these possible options to yield a positive result it is important that both parties are willing to take the following actions;
- Provide accurate and up to date information about the true financial state of the business or businesses.
- Be willing to understand the financial predicament(s) of the other party
- Consider options that might be a bit less conventional
- Listen to the concerns of both parties
- Remain open to the ideas of a neutral third party
- Keep all of your communications professional, respectful and clear
If both parties are willing to take the steps outlined above, it is highly likely they will be able to come to a workable compromise that will allow both businesses to remain operative and viable. In doing so, both parties will benefit from the ability to remain in business, serve their customers and provide employment for their employees.