If you have been given a bankruptcy notice or court order you must act rather quickly to prevent future distress. Owing anyone money known here as a creditor, can be any person or business to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will in turn 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 connect with the AFSA, and the minimum amount is $5,000. Soon after the creditor has attained a final judgment, AFSA will issue you with a bankruptcy notice.
It’s integral that you take immediate 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:
- Comply with the bankruptcy notice within 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 specified on the notice (normally 21 days).
Committing an act of bankruptcy suggests that you give your creditor the permission 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 can be served to you in several ways; it could be validly served to you personally, by normal post, or hand delivered to your registered address. In special situations, a bankruptcy notice could be served in digital format, either by means of email or fax.
If it’s not achievable for a creditor to serve a bankruptcy notice using any of these means, a court order may 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 abide by a bankruptcy notice, you must do one of three things:
- You must pay in full the amount detailed in the bankruptcy notice; or
- Organise an agreement with the creditor, for instance a payment plan over a defined period. The creditor must agree to the payment arrangements conditions. It’s always recommended 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 recommendations. If you have a notice of bankruptcy, simply phone us here at Bankruptcy Experts Shepparton 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 must not be taken lightly though, considering that if there are insufficient grounds to make an application then you will be subject to pay all the creditors legal fees which only inflates 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 refrain from committing an act of bankruptcy while the court processes your application. Basically, 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 demonstrate that the debt claimed on your bankruptcy notice does not exist, you have to 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 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 applicable documents with the court that handed down the order. Further, you must have the capacity to provide evidence to the Federal Circuit Court that shows that you have a genuine case for grounds of appeal.
Additionally, if you do not begin 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 be able 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 happens when the creditor has failed to follow 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 serious than others, and not all defects will make a bankruptcy notice invalid as these defects can be remedied at the discretion of the court under s 306( 1) of the Act.
Normally, the defect must be considerable or induce confusion over the actions you must take to adhere to the bankruptcy notice for you to have the opportunity 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 ultimately be invalid. The following lists some examples where these fundamental 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 stipulated 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 detailed in a separate document attached to the notice.
The following describes some cases where bankruptcy notice defects have not been considerable 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 below $5,000, provided that the total amount was in excess of $5,000 when the order or judgements were pronounced;
- A bankruptcy notice must be based 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 exemption is if the Official Receiver (reg 4.02 A) has increased 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, except if 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 greater than 6 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:
- 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 certified and have a reasonable possibility of succeeding; and.
- 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 (like lack of evidence or legal counsel), will not be sufficient.
What is an Abuse of process?
An abuse of process materialises if you can substantiate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, in contrast to a legitimate effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former holds true, then you will have the potential to set aside the bankruptcy notice resulting from an abuse of process. To succeed using these grounds, you will need to provide evidence of collateral purpose or unwarranted pressure.
What If I feel that 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 contend your bankruptcy, you will need to get the following documents prepared, filed, and served in order 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 obtain a final order or an interim order.
Final orders must illustrate the ideal outcome you wish 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 provide a copy of the bankruptcy notice with your application.
Conversely, an interim order has to specify 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 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 wish to make an application, it must be accompanied by an affidavit which cites the grounds of your application together 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 extremely important 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 abide by the bankruptcy notice may not be granted.
Filing your application.
As soon as your documents are finished, 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 charge that will need to be paid, however in certain scenarios you can apply for a waiver of this fee.
Serving your documents.
Once you’ve filed your application and affidavit and they have been stamped, you must personally serve these documents to the creditor within three days after the documents have been submitted.
If you are an individual, you must personally take the documents to the individual identified on the document and hand it to them. If they decide not to receive the documents, the person serving them may put the document in the presence of the individual to be served and verbally announce to the person what the documents entail.
If you are a company, you must personally visit a registered office of the company and give the documents to an individual servicing that business. You don’t need to present the documents to the organisations principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that organisations registered addresses.
If you 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.
If you’re not convinced whether you have grounds to set aside the bankruptcy notice, or you’re unclear whether you should spend the time and money to apply resulting from financial reasons, talk to Bankruptcy Experts Shepparton on 1300 795 575 for free advice. As an alternative, you can visit our website for more information: www.bankruptcyexpertsshepparton.com.au