If you have acquired a bankruptcy notice or court order you must take action immediately to reduce future distress. Owing someone else money regarded here as a creditor, can be any individual or organisation to whom you owe money. If you’re not able to pay money to a creditor, the creditor will consult the Australian Financial Security Authority (AFSA) who will subsequently send a bankruptcy notice demanding payment of that money.
Typically, there is a limit to the volume of money owing to creditors before they can approach the AFSA, and the minimum amount is $5,000. As soon as the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.
It’s extremely important 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:
- Satisfy the bankruptcy notice within the requested timeframe specified on the notice (normally 21 days); or
- Apply to the courts to ask for the bankruptcy notice be cancelled or set aside within the timeframe expressed on the notice (normally 21 days).
Committing an act of bankruptcy indicates that you give your creditor authority to apply to the Federal Circuit Court for a sequestration order, or in simple terms, an order that will make you lawfully bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice could be served to you in a number of ways; it could be validly served to you personally, by regular post, or hand delivered to your registered address. In special scenarios, a bankruptcy notice may be served in a digital format, either by means of fax or email.
If it’s not practical for a creditor to serve a bankruptcy notice using any of these methods, a court order can be attained which makes it possible for creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To fulfill a bankruptcy notice, you must do one of three things:
- You must pay in full the amount listed in the bankruptcy notice; or
- Arrange an agreement with the creditor, for instance a payment plan over a certain timeframe. The creditor must accept the payment arrangements terms. It’s always advised that the agreement is made in writing so you have confirmation of the agreement.
- Get some insolvency advice. At this point, you must not delay and get some guidance. If you have a notice of bankruptcy, just reach out to us here at Bankruptcy Experts Hervey Bay on 1300 795 575 for a Free Consultation.
It is crucial to note that all of these actions must be taken within the timeframe laid out in the bankruptcy notice (usually 21 days from the date of the notice).
Can I get my Bankruptcy Set Aside?
If warranted, you can apply to the court to have the bankruptcy notice cancelled or set aside. This mustn’t be taken lightly though, because if there are unsatisfactory grounds to make an application then you will be accountable 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 good idea to request that the court extends the timeframe for compliance with the bankruptcy notice, so you keep away from 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:
- The debt claimed on the bankruptcy notice does not exist;
- There is a defect in the bankruptcy notice;
- You have grounds for a counter-claim, cross demand, or set-off, equal to or exceeding the volume of debt issued in the bankruptcy notice; or
- The bankruptcy notice is an abuse of process.
What if the debt claimed on the bankruptcy notice does not exist?
To prove that the debt claimed on your bankruptcy notice does not exist, you need to provide evidence that:
- You have in fact paid the creditor the amount owing under the order or judgement; or
- You have appealed the order by initiating 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 a persuasive argument to do so. You must have already submitted the necessary documents with the court that handed down the order. Further, you must have the ability to present evidence to the Federal Circuit Court that establishes that you have an authentic case for grounds of appeal.
Further, if you do not initiate the process of setting aside the judgement or order prior to 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. As a result, 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 arises when the creditor has failed to satisfy the requirements of the Act, in which case you may have grounds to make an application for the bankruptcy notice to be set aside. Some defects are more severe than others, and not all defects will make a bankruptcy notice invalid as these defects can be addressed at the discretion of the court under s 306( 1) of the Act.
Ordinarily, the defect must be considerable or cause confusion over the actions you must take to comply with the bankruptcy notice for you to have the ability to set aside the bankruptcy notice.
There are some crucial requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be invalid. The following provides some examples where these vital requirements have not been met:
- The creditor’s address on the bankruptcy notice should make it reasonably practicable for the debtor to make payment (e.g. PO Boxes may not be appropriate);.
- 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 cited in a separate 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 stated in an independent document attached to the notice.
The following details some cases where bankruptcy notice defects have not been significant 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 (assuming 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 more than $5,000 when the order or judgements were pronounced;.
- A bankruptcy notice must be founded on 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 six months of its issue. The only exemption is if the Official Receiver (reg 4.02 A) has extended 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 invalidate a bankruptcy notice, unless the debtor challenges the credibility of the notice within the timeframe for compliance (s 41( 5)); and.
- The order or judgment on which the bankruptcy notice is based can not be more 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 need to proficiently demonstrate to the court the following two items:
- The counter-claim, set-off or cross demand is equal to or more than the total amount claimed by the creditor in the bankruptcy notice. You must also satisfy the court that these claims are legitimate and have a reasonable likelihood of succeeding; and.
- The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor obtained the judgement on which the bankruptcy notice is based on. Failure to take advantage of the opportunity to counter-claim, including any adversarial personal circumstances (for instance lack of evidence or legal advice), will not be sufficient.
What is an Abuse of process?
An abuse of process transpires if you can validate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, as opposed to an honest effort by the creditor to invoke the court’s jurisdiction in relation to bankruptcy. If the former holds true, then you will have the opportunity to set aside the bankruptcy notice because of an abuse of process. To be successful using these grounds, you will need to supply evidence of collateral purpose or excessive pressure.
What If I feel I have grounds to act on one of these items above?
If you find that 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 so as to apply for your bankruptcy notice to be set aside:.
- Application (Form B2); and.
You can locate the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either make an application for a final order or an interim order.
Final orders need 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 may 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 present a copy of the bankruptcy notice with your application.
Moreover, an interim order must 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 might be: “The time for compliance with bankruptcy notice (BN00233) be increased up to and including 7 days after the outcome of this application by the Court under section 41( 6A) of the Bankruptcy Act 1966.”.
If you want to make an application, it must be accompanied by an affidavit which outlines the grounds of your application as well as 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 very important that your affidavit must fulfill rule 3.02 of the Rules, or else your application may be declined and your request for an extension of time to satisfy the bankruptcy notice may not be approved.
Filing your application.
As soon as your documents are completed, they will need to be filed with the courts either online or personally at the Federal Circuit Court Registry.
There is a lodging fee that will need to be paid, however in various scenarios 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 filed.
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 choose not to take the documents, the individual serving them may put the document in the presence of the person to be served and verbally explain to the individual what the documents are.
If you are a company, you must personally go to a registered office of the organisation and deliver the documents to an individual servicing that organisation. You don’t have to hand the documents to the businesses principal address, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that businesses registered addresses.
If you want somebody else to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a fee.
If you’re not satisfied whether you have grounds to set aside the bankruptcy notice, or you’re hesitant whether you should devote the time and money to apply resulting from financial reasons, speak to Bankruptcy Experts Hervey Bay on 1300 795 575 for free advice. Alternatively, you can visit our website for additional details: www.bankruptcyexpertsherveybay.com.au