COVID-19 Bankruptcy Notice Measures Rolled Back

  • COVID-19
  • Published 29.01.2021

Key Takeaways

Important changes have taken place from 1 January 2021 that concern bankruptcy notices and temporary debt protection for individual debtors. These changes include:

  • The minimum debt threshold for creditors to apply for a bankruptcy notice is $10,000.
  • The timeframe for a debtor to comply with a bankruptcy notice has reverted to 21 days.
  • The period for temporary debt protection for debtors has reduced from 6 months to 21 days.

Creditors may be less familiar with the temporary debt protection that is available to individual debtors which prevents creditors from enforcing certain debts against them for 21 days. Creditors need to be aware of this measure and understand whether it affects the enforcement of their debt. 

Brief Facts 

Temporary Debt Protection 
Individual debtors dealing with unmanageable debt are eligible to apply to AFSA for Temporary Debt Protection (TDP). 

TDP provides debtors a 21 day protection period in which creditors cannot take enforcement action to recover money owing to them. The objective is to give individuals some breathing space to give them an opportunity to review their financial position; seek financial advice; consider formal insolvency options and negotiate an arrangement with their creditors. 

Who May Apply for TDP

Anyone with unmanageable debt can apply for TDP unless that person:

  • Has previously been granted TDP within the last 12 months.
  • Is subject to a current debt agreement or personal insolvency agreement.
  • Has been served with a Creditor’s Petition.

To apply for TDP, a debtor must complete and lodge with AFSA a TDP Form. The form will require the debtor to disclose information regarding their assets and liabilities.  

If the Official Receiver at AFSA is satisfied that the debtor is eligible for TDP, it will accept the application and then notify the debtor and his or her creditors in writing that TDP has been granted. 

The debtor will be provided with an AFSA administration number. The details of the TDP do not appear on the National Personal Insolvency Index (NPII).

Implications of TDP

Unsecured creditors

You cannot:

  • enforce any judgment obtained against the debtor – this means, you cannot garnish the debtor’s wages or debts or instruct a sheriff to seize the debtor’s goods

You can:

  • call the debtor to discuss the debt and negotiate a payment arrangement
  • take or continue legal action to recover the debt

Secured creditors are not prevented from repossessing secured assets.

For debtors, obtaining TDP is an act of bankruptcy. Creditors can rely on the act of bankruptcy to file a creditor’s petition if the debtor does not lodge a debtor’s petition before or after the 21day period lapses.

Creditors will not become aware that a debtor has applied for or been granted TPD unless and until they are notified by AFSA or the debtor. Creditors should always ask debtors for their AFSA administration number in order to verify that the debtor has been granted TDP. 

For those creditors who cannot enforce during the TDP period, it is a good opportunity for you to obtain a copy of the debtor’s statement of financial affairs in order to assess whether you can negotiate an informal arrangement with the debtor. This will enable you to more effectively and empathetically engage with your customer and contain enforcement costs. 

Fiona Reynolds


P: 02 8257 5751

Email Fiona