If you have acquired a bankruptcy notice or court order you must act rather quickly to avoid future pain. Owing anyone money regarded here as a creditor, could be any person or business to whom you owe money. If you’re unable to pay money to a creditor, the creditor will get in touch with the Australian Financial Security Authority (AFSA) who will subsequently issue a bankruptcy notice requesting payment of that money.
Obviously, there is a limit to the level of money owing to creditors before they can consult with the AFSA, and the minimum amount is $5,000. As soon as the creditor has acquired a final judgment, AFSA will issue you with a bankruptcy notice.
It’s imperative that you take immediate action if you receive a bankruptcy notice from the AFSA. You will commit an ‘act of bankruptcy’ if you do not do any of the following:
- Comply with the bankruptcy notice within the requested timeframe mentioned 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 expressed on the notice (normally 21 days).
Committing an act of bankruptcy means that you give your creditor authorisation to apply to the Federal Circuit Court for a sequestration order, or in other words, an order that will make you legally bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice could be served to you in a couple of ways; it may be validly served to you in person, by regular post, or hand delivered to your registered address. In special situations, a bankruptcy notice could be served in a digital form, either through fax or email.
If it’s not conceivable for a creditor to serve a bankruptcy notice using any of these methods, a court order can be provided which permits creditors to serve the bankruptcy notice in a separate 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 indicated in the bankruptcy notice; or
- Set up an agreement with the creditor, for example a payment plan over a specific time period. The creditor must accept the payment arrangements terms and conditions. It’s always recommended that the agreement is made in writing so you have confirmation of the agreement.
- Get some bankruptcy advice. At this point, you must not delay and get some advice. If you have a notice of bankruptcy, simply give us a call here at Bankruptcy Experts Gosford on 1300 795 575 for a Free Consultation.
It’s important to note that all of these actions must be taken inside the timeframe stipulated 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 set aside or cancelled. This should not be taken lightly though, considering that if there are inadequate grounds to make an application then you will be under obligation to pay all the creditors legal costs which only increases 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 prolongs the timeframe for compliance with the bankruptcy notice, so you stay clear of committing an act of bankruptcy while the court processes your application. Essentially, don’t leave it to the last minute.
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 amount 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 establish 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 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 submitted the relevant documents with the court that handed down the order. Moreover, you must have the capacity to supply evidence to the Federal Circuit Court that shows that you have a legitimate case for grounds of appeal.
Moreover, if you do not start 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 be able to lengthen 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 happens when the creditor has failed to fulfill the requirements of the Act, in which case you might have grounds to apply for the bankruptcy notice to be set aside. Some defects are more critical than others, and not all defects will make a bankruptcy notice void as these defects can be mended at the discretion of the court under s 306( 1) of the Act.
Ordinarily, the defect must be considerable or lead to 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 fundamental requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be void. The following lists some examples where these critical 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 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 itemised 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 cited in an independent document attached to the notice.
The following describes some scenarios 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 (assuming payment can be reasonably made to this address).
There are several other legal requirements that should be kept in mind. 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 below $5,000, provided that the total amount was more than $5,000 when the order or judgements were pronounced;
- A bankruptcy notice must be formed 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 6 months of its issue. The only exception 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 revoke a bankruptcy notice, except if the debtor contests the legitimacy of the notice inside the timeframe for compliance (s 41( 5)); and.
- The order or judgment on which the bankruptcy notice is based can not be more than 6 years old (s 41( 3)( c)).
Under what grounds could I counter-claim, set-off or cross demand?
To succeed 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 genuine 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 attained the judgement on which the bankruptcy notice is based on. Failure to benefit from the opportunity to counter-claim, including any negative personal circumstances (such as lack of evidence or legal advice), will not suffice.
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 a real effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former holds true, then you will have the chance 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 believe I have grounds to act on one of these items above?
If you believe 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 to apply for your bankruptcy notice to be set aside:.
- Application (Form B2); and.
You can find the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either obtain a final order or an interim order.
Final orders have to illustrate the ideal result you want to receive and the legislative basis which the court can grant this decision. An example of a final order could 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.
Alternatively, an interim order has to detail any outcomes you wish before the application is finally decided upon, and the legislative basis which the court can approve this decision. An example of an interim order could be: “The time for compliance with bankruptcy notice (BN00233) be lengthened 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 wish to make an application, it must be accompanied by an affidavit which summarises the grounds of your application in conjunction 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 vital that your affidavit must abide by rule 3.02 of the Rules, otherwise your application may be rejected and your request for an extension of time to comply with the bankruptcy notice may not be approved.
Filing your application.
Once your documents are finished, they will need to be filed with the courts either online or in person at the Federal Circuit Court Registry.
There is a lodging charge 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 person identified on the document and give it to them. If they decide not to receive the documents, the person serving them may place the document in the presence of the individual to be served and verbally notify the person what the documents consist of.
If you are a company, you must personally go to a registered office of the business and present the documents to a person servicing that company. You don’t have to deliver 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 wish 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.
If you’re not satisfied whether you have grounds to set aside the bankruptcy notice, or you’re skeptical whether you should spend the time and money to apply resulting from financial reasons, get in touch with Bankruptcy Experts Gosford on 1300 795 575 for free advice. Additionally, you can visit our website for additional information: www.bankruptcyexpertsgosford.com.au