I've received a temporary debt protection (TDP) notice

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What is temporary debt protection (TDP)?

Temporary debt protection provides a 21-day protection period for debtors. During this time, unsecured creditors, the bailiff or sheriff can't take action to recover unsecured debts against the debtor themselves or their property. This gives the debtor time to consider all their options and discuss alternative arrangements with their creditors.

Lodging a TDP (formally known as a declaration of intention to present a debtor's petition) is an act of bankruptcy under s54A of the Bankruptcy Act 1966. The debtor is indicating they may be insolvent. The debtor is not automatically made bankrupt at the end of the 21 days. Creditors can, however, use a TDP as the basis for a creditor’s petition to the court to make the debtor bankrupt.

For more information, see Make someone bankrupt.

Case study: Manpreet

How Temporary Debt Protection affects a creditor

Manpreet owns and operates a coffee bean supply company. They roast beans and sell them to local cafés.

Most of their customers have been impacted by the coronavirus. Cafés have only been able to sell takeaway coffees, which has hurt their revenue. Manpreet's larger customers went through 10 kg of coffee beans in a day, but now many are lucky if they get through 1 kg. Others have simply closed their doors.

Many of Manpreet's ongoing customers have fallen behind on payments, and now they are struggling to pay their own bills. Needing to keep up their own business' cash flow, Manpreet contacted a solicitor to act on their behalf in collecting overdue payments from customers.

The solicitor suggested Manpreet obtain a court judgment against one of their customers – Julia – to give them some enforcement options. Julia is a sole trader who runs a local café, who would regularly buy roasted coffee beans from Manpreet.

A judgment usually means that Manpreet could charge interest on the debt owed at the post judgment rate and also consider further steps against the customer, like a wage garnishee order.

Manpreet's solicitor was able to have the judgment registered, but Julia filed for Temporary Debt Protection (TDP) with AFSA. The TDP stopped Manpreet from being able to use enforcement options such as a wage garnishee, or applying for the sheriff to seize and sell Julia's assets. Julia is protected for a period of 21 days.

As part of the TDP process Julia completed a brief statement of financial affairs, which included information about income, assets and debts. As a creditor this information was provided to Manpreet, allowing for a better understanding of the situation that Julia was in. Manpreet realised that the debts were widespread and Julia's financial position was made worse by COVID-19.

Armed with new knowledge of Julia's situation, Manpreet reached out directly and was able to come to an arrangement that kept both businesses functioning as best as possible. Even during the temporary debt protection period, Manpreet can contact Julia to discuss their options – they do not have to communicate through solicitors or AFSA.

Important information

If you are supplying goods on credit terms to your customers, you may wish to consider making a registration on the Personal Property Securities Register (PPSR). An agreement with your customer, along with an effective registration on the PPSR, is one way to help you get your invoices paid, or your goods back, if your customer doesn't pay or goes out of business.

Find out more about the Personal Property Securities Register (PPSR)

Note: These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.

What to do if you think the information in a temporary debt protection (TDP) form is inaccurate

If you have been notified of an accepted TDP but think the information about the debtor’s assets and income might be wrong, you should advise the Official Receiver in writing. For more information, please contact us.