FROM BOOM TO BUST: NAVIGATING THE IMPACT OF SOARING INTEREST RATES
Posted on 29 March 2023
Maddison Thomson
From Boom to Bust: Navigating the Impact of Soaring Interest Rates and What This Could Mean for You and Your Business
The RBA announced its tenth consecutive interest rate hike in recent weeks, with major banks following suit not long after. Interest rates are now at a fresh high of 3.6% and there are little to no signs of it slowing down in the near future. The recent interest rate hikes will have varying degrees of impact on the local community and will be felt by large companies, small businesses, and the individual consumer alike.
Times are tough for many people and understandably so.
When you or your business face financial difficulties, it can be an incredibly stressful and overwhelming experience. In these situations, it is important to have a team of professionals by your side to help you make the best possible decisions and find a way forward in these uncertain times. One of the important members of this team is a lawyer, who is well versed in restructuring, bankruptcy and insolvency matters. Here at Omnia Legal, we are ready to assist you with navigating the complexities surrounding this area of law.
Understanding the Key Concepts
Creditors: Put simply, a creditor is an individual or business that lends money, credit, goods or services to another individual or business with the expectation of receiving payment at a later time. A creditor can either be secured or unsecured. For example:
- A secured creditor holds a security interest, such as a mortgage, which secures the debt owed by the individual or business; and
- An unsecured creditor does not hold any security interest over the assets of the individual or business.
Bankruptcy: This term describes the legal process for individuals who are unable to pay their debts. Should you declare bankruptcy, you will be absolved from paying your debts (subject to specific legislative requirements). A Trustee will be appointed to administer your affairs to ensure a fair distribution of your assets to the relevant creditors. Although a neat treat, declaring bankruptcy is not a get out of jail free card, and it can have significant impacts on your ability to access credit for the rest of your life.
Insolvency: This term refers to the financial state of an organisation when it is unable to meet its financial obligations when they become due and payable.
Restructuring: When a company is faced with the threat of insolvency, it can take active steps to significantly modify its structure to alleviate financial and operational pressures. Restructuring is a method of early intervention. If you elect to restructure your company when there are early indicators of financial distress, both yourself and the appointed restructuring practitioner will have more pathways to pursue. It is often too late to restructure if the company has a lack of consumer support and working capital.
How Can Omnia Legal Assist You and Your Business?
These terms and processes can seem daunting and increasingly difficult to understand in times of significant financial distress. Here are five reasons why you should engage a lawyer to assist with navigating the complexities surrounding bankruptcy, insolvency, and restructuring:
- To Understand the Legal Process
This area of law involves incredibly complex legal proceedings that can be difficult to understand at the best of times, let alone in circumstances of financial distress. Our lawyers have the necessary expertise to guide you through these processes to ensure that you understand your rights and obligations throughout. We will prioritise the protection of your business and its reputation, that you will have no doubt worked hard to build and maintain. We are committed to ensuring you felt heard during the legal process to ensure the best possible outcome for you and your business.
- To Protect your Rights
During times of financial distress, creditors may seek to take advantage of a business and its state to collect debts or seize assets. A lawyer is necessary to protect your rights and interests, ensuring creditors follow the correct legal process and do not engage in any unfair or illegal practices. If you are issued with a Statutory Demand from a creditor, we recommend that you click here to read about the potential implications of failing to adequately respond within 21 days.
- To Develop a Plan
A lawyer, alongside a restructuring or insolvency practitioner (if applicable), can help you develop a plan to best manage your debts and assets. This can involve negotiating with creditors, creating a repayment plan, or exploring other options for resolving your debts. This will help you not only sleep better at night but will assist with minimising detriment to your business and its operations, making you feel in control of the situation.
- Minimising Losses
An experienced lawyer can advise you on the best course of action to protect your assets and reduce the impact of proceedings or restructuring on your personal and professional life.
- Providing Guidance and Support
Facing insolvency or bankruptcy can be a stressful and emotional experience. A lawyer who specialises in this area of law can provide the guidance and support you need to navigate the process and make informed decisions.
HOW CAN OMNIA LEGAL ASSIST YOU?
The Commercial Law team at Omnia Legal are trusted business advisors that can assist with navigating the complexities surrounding bankruptcy, insolvency and restructuring. We will liaise with the relevant parties to ensure that you are well informed throughout the process and maximise the protection afforded to your business.
This article provides general information on legal topics for educational purposes only, and should not be considered legal advice or recommendations. While we have taken care to ensure accuracy, Omnia Legal is not responsible for any errors, and makes no guarantees about the accuracy or completeness of the information. Links to third-party websites do not constitute an endorsement, and we are not liable for any damages that may result from using inaccurate or incomplete information. It's always best to seek legal advice for specific situations.