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COVID-19 Debt Considerations Guide 2021

COVID-19 Debt Considerations Guide 2021

Many businesses have been forced to shut down and their debt considerations are growing. Here are some commonly asked questions.

23rd July 2021
Reading Time: 4 minutes

The COVID-19 pandemic has negatively impacted many businesses and individual’s financial stability. With many businesses forced to shut down and employees losing their jobs, debt considerations are growing. Here are some common questions asked during this time of uncertainty.

I owe money on an invoice that I currently cannot afford to pay. What should I do?

In light of the impact of COVID-19, many businesses have changed their process of debt collection. Some have even froze billing on mortgages, electricity or energy. It can be overwhelming when a debt collector contacts you about your debt. As such, many businesses are showing compassion by:

1) Being honest and encouraging open communication

It should be in most businesses’ interest to maintain strong relationships with their customers. This means most businesses will attempt to sincerely understand your financial situations and want to compromise with you in discussing payment expectations. Take this to your advantage to communicate openly and honestly with the party you owe money.

2) Using pre-legal options

In response to the economic fallout from COVID-19 pandemic, businesses may use pre-legal options such as demand letters. Businesses commonly know that invoices become harder to collect as they age. So, they may be sending this demand letter sooner than they usually would have. Remember to not ignore the demand letter as it can be used against you in court. Instead, read for the additional options to assist your payments that the company has provided. Remember that they will most likely want to maintain a good relationship with you, especially if you have been a loyal customer before the pandemic hit.

3) Improving communication methods with their customers

Businesses are beginning to enhance their way of communicating with their customers. From traditional emails and letters to communicating digitally for prompter and more efficient responses. Ensure you respond to the companies reaching out to you in a reasonable period of time. This is actually your opportunity to bargain for an extension of time or discuss alternative methods of payment to assist you.

Final note on debt considerations

Of course, there will be circumstances where businesses do not show you compassion and leniency. Keep in mind you have the option of obtaining legal advice. Furthermore, the government recognises the unexpected financial hardships that have taken in place during the pandemic. If you have lost income due to the COVID-19 pandemic, look into your eligibility for the COVID-19 disaster payment and Pandemic leave disaster payment. Depending on your specific circumstances and eligibility, you may receive up to $1,500 that could assist in your payment of debt.

I am owed money on an invoice for a business impacted by lockdown. What should I do?

Understandably, many businesses have experienced significant negative impact as a result of the pandemic. Although you understand businesses’ financial hardship, you may still have money owed to you. Let’s find out ways in which you can recover this payment whilst maintaining a good relationship with the business.

Step 1) Contact the business regarding the money owed

This should be your first step before entering into any form of legal proceedings regarding debt considerations. Who knows? You might come to a satisfactory conclusion by simply having a formal discussion. Encourage open communication and be ready to compromise. You might want to consider the following:

  • Any alternative ways to receive the payment in time
  • A reasonable extension of the time period
  • Settlement of payment
  • Making a payment plan
  • Sending a demand letter

Step 2) Make a payment plan

It will most likely be in the business’ interest to avoid liability for failing to pay debt. It will significantly damage companies’ reputation and lose their ties with you. If you’re willing to show leniency and understanding during this time of hardship, making a payment plan can satisfy both parties. It will still allow you to receive the full payment by receiving smaller amounts of payment over a longer period of time. Once the business can afford to pay the rest of the debt in a lump sum, you’ll be able to close the debt.

Step 3) Lodge a proof of a debt form

If all your attempts to reach out and compromise with the business fails, you may still be able to receive payments from the trustee of the business. This is in circumstances where the business has become bankrupt as a consequence of COVID-19. You may need to prove the debt owed by lodging a Proof of Debt Form. The trustee will notify you in this circumstances, so ensure you also take responsibility to let the trustee know your awareness of the debt. Read more about ways in which you can recover a debt here.

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Author
Julie Hwang

Julie is a Legal Technology Intern at Lawpath. She is currently studying Bachelor of Laws and Commerce at the University of Sydney. She's interested in how technology can shape the future legal industry.