The impacts of COVID-19 have already been significant and widespread across the real estate sector; felt by landlords, homeowners and renters, alike.
Many are suffering job losses or significant decreases in their income and despite the banks stepping in to support homeowners with deferred mortgage repayments, and the Government putting a moratorium on evictions for the next six months, it’s understandable that many people are still feeling tense about whether these measures are enough to safeguard their financial health, and their homes in the coming months.
Thankfully, it’s not just rental support and mortgage payment deferments that have been put in place to help Australian’s weather this period of uncertainty and economic unrest. Before these other measures were even enacted, changes were made to the Australian bankruptcy laws, providing the first layer of security for those who are doing it particularly tough through the COVID-19 lockdown.
Australian Bankruptcy Law Changes
The changes, which came into effect on March 25 2020, pertain specifically to extensions of Temporary Debt Protection (TDP)/Declaration of Intent (DOI), and extensions on new Bankruptcy Notices.
In the extension of Temporary Debt Protection (TDP), (which is also known as Declaration of Intent (DOI)), applicants will now have six months — extended from 21 days — to seek appropriate advice, negotiate payment plans with creditors, and consider their long-term, formal insolvency options, such as debt agreements, personal insolvency agreements and Bankruptcy.
The TDP/DOI prevents recovery action by unsecured creditors for this set period. This means that anyone facing bankruptcy during this period will be protected from unsecured creditors seizing their assets, helping to keep their home intact while facing the challenges of COVID-19.
This option is not available to anyone who has had a previous TDP accepted in the last 12 months, is currently in an active debt agreement or personal insolvency agreement, or has been served with a Creditor’s Petition that has been filed through the Federal Circuit Court. Those with current Bankruptcy Notices are also ineligible.
There have, however, been changes made to the Bankruptcy Notice — which is a formal part of the legal process that’s required to be submitted when a creditor intends to make a debtor bankrupt.
As of March 25, 2020, the debt threshold required for creditors to apply for a Bankruptcy Notice has increased from $5,000 to $20,000, and the timeframe in which a debtor has to respond to a Bankruptcy Notice has increased from 21 days to six months.
What Do The New Bankruptcy Laws Mean for Real Estate?
As with other measures, the temporary changes in Australian Bankruptcy Law are in place to help renters, homeowners and landlords to maintain security, stay in their homes, and use this extended timeframe to try and get through their hardship. This could mean a delay in an eventual bankruptcy or the time required to avoid it altogether.
Anyone facing bankruptcy should seek professional advice and follow closely to see if any changes are made to these laws as the COVID-19 situation continues to unfold.