Everything you must know about Bankruptcy Notices

If you have been given a bankruptcy notice or court order you must take action rather quickly to prevent future pain. Owing anyone money regarded here as a creditor, could be any person or business to whom you owe money. If you’re not able to pay money to a creditor, the creditor will reach out to the Australian Financial Security Authority (AFSA) who will consequently send a bankruptcy notice demanding payment of that money.

 

Obviously, there is a limit to the quantity of money owing to creditors before they can get in touch with the AFSA, and the minimum amount is $5,000. When the creditor has secured a final judgment, AFSA will issue you with a bankruptcy notice.

 

It’s integral that you take swift action if you receive a bankruptcy notice from the AFSA. You will commit an ‘act of bankruptcy’ if you fail to do any of the following:

 

– Fulfill the bankruptcy notice inside the requested timeframe stated on the notice (normally 21 days); or

 

– Apply to the courts to ask for the bankruptcy notice be cancelled or set aside in less than the timeframe presented on the notice (normally 21 days).

 

Committing an act of bankruptcy means that you give your creditor the authority to apply to the Federal Circuit Court for a sequestration order, or to put it simply, an order that will make you lawfully bankrupt.

 

How does a Bankruptcy Notice get served to me?

 

A bankruptcy notice can be served to you in a range of ways; it could be validly served to you individually, by normal post, or hand delivered to your registered address. In several circumstances, a bankruptcy notice could be served in an electronic format, either by means of email or fax.

 

If it’s not practical for a creditor to serve a bankruptcy notice using any of these means, a court order can be obtained which enables creditors to serve the bankruptcy notice in a different way.

 

I have a bankruptcy notice, now what?

 

To comply with a bankruptcy notice, you must do one of three things:

 

  1. You must pay in full the amount indicated in the bankruptcy notice; or

 

  1. Organise an agreement with the creditor, for example a payment plan over a defined period of time. The creditor must agree to the payment arrangements conditions. It’s always suggested that the agreement is made in writing so you have proof of the agreement.

 

  1. Get some insolvency advice. At this point, you must not delay and get some advice. If you have a notice of bankruptcy, simply contact us here at Bankruptcy Australia on 1300 795 575 for a Free Consultation.

 

It is very important to note that all of these actions must be taken within the timeframe stipulated in the bankruptcy notice (usually 21 days from the date of the notice).

 

Can I get my Bankruptcy Set Aside?

 

If justified, you can apply to the court to have the bankruptcy notice set aside or cancelled. This should never be taken lightly however, because if there are unsatisfactory grounds to make an application then you will be subject to pay all the creditors legal fees which only raises the debt you owe to them.

 

If you do apply for your bankruptcy notice to be set aside, it’s always a wise idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. To put it simply, don’t leave it to the eleventh hour.

 

To have your bankruptcy notice set aside, one of the following conditions must apply:

 

  1. The debt claimed on the bankruptcy notice does not exist;

 

  1. There is a defect in the bankruptcy notice;

 

  1. You have grounds for a counter-claim, cross demand, or set-off, equal to or exceeding the sum of debt issued in the bankruptcy notice; or

 

  1. The bankruptcy notice is an abuse of process.

 

What if the debt claimed on the bankruptcy notice does not exist?

 

To substantiate that the debt claimed on your bankruptcy notice does not exist, you must present evidence that:

 

– You have in fact paid the creditor the amount owing under the order or judgement; or

 

– You have appealed the order by launching proceedings to set aside the order or judgement.

 

In your application to set aside the bankruptcy notice, you can not simply say that you have an authentic argument to do so. You must have already filed the appropriate documents with the court that handed down the order. Along with this, you must have the ability to provide evidence to the Federal Circuit Court that demonstrates that you have a genuine case for grounds of appeal.

 

Further, if you do not initiate the process of setting aside the judgement or order before filing your application to set aside the bankruptcy notice, the Federal Circuit Court will not have the capacity to extend the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. For this reason, you will have committed an act of bankruptcy.

 

What is a Defective Bankruptcy Notice?

 

A defect in the form or content of the bankruptcy notice appears when the creditor has failed to fulfill the requirements of the Act, in which case you might have grounds to request the bankruptcy notice to be set aside. Some defects are more weighty than others, and not all defects will make a bankruptcy notice void as these defects can be fixed at the discretion of the court under s 306( 1) of the Act.

 

Typically, the defect must be significant or inflict confusion over the actions you must take to abide by the bankruptcy notice for you to have the capability to set aside the bankruptcy notice.

 

There are some critical requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be void. The following provides some examples where these crucial requirements have not been met:

 

– The creditor’s address on the bankruptcy notice has to make it reasonably practicable for the debtor to make payment (e.g. PO Boxes may not be suitable);.

 

– The creditor’s and debtor’s name on the bankruptcy notice must match the creditor’s and debtor’s name in the order or judgement;.

 

– Attached to the bankruptcy notice must be a copy of the judgement or order;.

 

– It is a requirement that there is a timeframe for compliance included in the bankruptcy notice;.

 

– If the creditor is claiming interest on the debt owed to them, the calculations must be stated in an independent document attached to the notice; and.

 

– If any part-payments made by the debtor, or any other allowed reductions, the total amount of these deductions must be specified in a separate document attached to the notice.

 

The following details some situations where bankruptcy notice defects have not been serious enough to make them void:.

 

– Failure to include the ACN of the company who is the creditor; and.

 

– The creditor’s address is listed as the address of their solicitors (presuming payment can be reasonably made to this address).

 

There are several other legal requirements that should be considered. These include:.

 

– The order or judgement must be at least $5,000, not including any post judgement interest being claimed by the creditor;.

 

– A bankruptcy notice can still be issued if the total amount is less than $5,000, provided that the total amount was higher than $5,000 when the order or judgements were pronounced;.

 

– A bankruptcy notice must be based upon a final judgement or order that is currently owing to a creditor under s 40( 3) of the Act. A final judgement is defined as a judgement which finally disposes of the rights of the parties involved;.

 

– A bankruptcy notice must be served with 6 months of its issue. The only exemption is if the Official Receiver (reg 4.02 A) has lengthened this timeframe;.

 

– The final order or judgement must not be stayed both at the time of issue of the notice and the time of its service. If a stay of execution is granted after service, it has no bearing on the bankruptcy notice;.

 

– An overstatement of the amount claimed to be owed to a creditor does not disqualify a bankruptcy notice, except if the debtor challenges the credibility of the notice in less than the timeframe for compliance (s 41( 5)); and.

 

– The order or judgment on which the bankruptcy notice is based can not be greater than six years old (s 41( 3)( c)).

 

Under what grounds could I counter-claim, set-off or cross demand?

 

To be successful using the grounds of counter-claim, set-off or cross demand, you will have to properly demonstrate to the court the following two items:.

 

  1. The counter-claim, set-off or cross demand is equal to or greater than the total amount claimed by the creditor in the bankruptcy notice. You must also satisfy the court that these claims are genuine and have a reasonable chance of succeeding; and.

 

  1. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor received the judgement on which the bankruptcy notice is based on. Failure to benefit from the opportunity to counter-claim, including any adversarial personal circumstances (for example lack of evidence or legal counsel), will not be adequate.

 

What is an Abuse of process?

 

An abuse of process ensues if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of an honest effort by the creditor to invoke the court’s jurisdiction in connection with bankruptcy. If the former holds true, then you will have the potential to set aside the bankruptcy notice as a result of an abuse of process. To be successful using these grounds, you will need to present evidence of collateral purpose or unnecessary pressure.

 

What If I feel that I have grounds to act on one of these items above?

 

If you think you have a case for one of the previously mentioned reasons to contest your bankruptcy, you will need to get the following documents prepared, filed, and served if you want to apply for your bankruptcy notice to be set aside:.

 

  1. Application (Form B2); and.

 

  1. Affidavit.

 

Application.

 

You can locate the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either secure a final order or an interim order.

 

Final orders have to summarise the ideal result you want to receive and the legislative basis which the court can approve this decision. An example of a final order can be: “That bankruptcy notice (BN00231) issued on 15 June 2017, which was served to me on 1 July 2017, be set aside under section 30( 1) of the Bankruptcy Act 1966.” You would also need to supply a copy of the bankruptcy notice with your application.

 

On the contrary, an interim order has to outline any outcomes you wish before the application is finally decided upon, and the legislative basis which the court can grant this decision. An example of an interim order could be: “The time for compliance with bankruptcy notice (BN00233) be prolonged up to and including 7 days after the outcome of this application by the Court under section 41( 6A) of the Bankruptcy Act 1966.”.

 

Affidavit.

 

If you elect to make an application, it must be accompanied by an affidavit which describes the grounds of your application along with the date the bankruptcy notice was served to you. If you’ve already made an application to set aside the judgement of the bankruptcy notice, a copy of this application/s also needs to be attached. It’s crucial that your affidavit must comply with rule 3.02 of the Rules, or else your application may be refused and your request for an extension of time to fulfill the bankruptcy notice may not be approved.

 

Filing your application.

 

Once your documents are finalised, they will need to be filed with the courts either online or face to face at the Federal Circuit Court Registry.

 

There is a lodging fee that will need to be paid, however in some situations you can apply for a waiver of this fee.

 

Serving your documents.

 

Once you’ve lodged your application and affidavit and they have been stamped, you must personally serve these documents to the creditor within 3 days after the documents have been lodged.

 

If you are an individual, you must personally take the documents to the individual identified on the document and give it to them. If they refuse to take the documents, the individual serving them may put the document in the presence of the individual to be served and verbally tell the individual what the documents entail.

 

If you are a business, you must personally visit a registered office of the company and give the documents to a person servicing that business. You don’t need to present the documents to the businesses principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.

 

If you would prefer someone else to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a cost.

 

Financial Advice.

 

If you’re not sure whether you have grounds to set aside the bankruptcy notice, or you’re not sure whether you should invest the time and money to apply due to financial reasons, talk to Bankruptcy Australia on 1300 795 575 for free advice. As an alternative, you can visit our website for more information: www.bankruptcy-australia.net.au