If you have acquired a bankruptcy notice or court order you must respond right away to reduce future distress. Owing anybody money regarded here as a creditor, may be any person or company to whom you owe money. If you’re unable to pay money to a creditor, the creditor will speak to the Australian Financial Security Authority (AFSA) who will in turn send a bankruptcy notice requesting payment of that money.
Clearly, there is a threshold to the volume of money owing to creditors before they can connect with the AFSA, and the minimum amount is $5,000. When the creditor has acquired a final judgment, AFSA will issue you with a bankruptcy notice.
It’s paramount 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 in less than the requested timeframe expressed 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 reported on the notice (normally 21 days).
Committing an act of bankruptcy means that you give your creditor the authorisation 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 could be served to you in several ways; it could be validly served to you in person, by normal post, or hand delivered to your registered address. In several circumstances, a bankruptcy notice may be served electronically, either via fax or email.
If it’s not plausible for a creditor to serve a bankruptcy notice using any of the above sources, a court order may be provided which allows creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To satisfy a bankruptcy notice, you must do one of three things:
- You must pay in full the amount listed in the bankruptcy notice; or
- Establish an agreement with the creditor, for example a payment plan over a specific timeframe. The creditor must accept the payment arrangements conditions. It’s always suggested that the agreement is made in writing so you have documentation of the agreement.
- Get some insolvency advice. At this point, you must not delay and get some advice. If you have a notice of bankruptcy, simply reach out to us here at Bankruptcy Experts Tweed Coast on 1300 795 575 for a Free Consultation.
It is crucial to note that all of these actions must be taken inside the timeframe cited 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 never be taken lightly though, given that if there are insufficient grounds to make an application then you will be accountable 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 extends the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. Simply put, 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 level 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 have to supply 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 an authentic argument to do so. You must have already submitted the relevant documents with the court that handed down the order. Additionally, you must have the ability to supply evidence to the Federal Circuit Court that displays that you have a legitimate case for grounds of appeal.
Secondly, 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 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 happens when the creditor has failed to follow the requirements of the Act, in which case you may have grounds to request the bankruptcy notice to be set aside. Some defects are more arduous than others, and not all defects will make a bankruptcy notice void as these defects can be remedied at the discretion of the court under s 306( 1) of the Act.
In general, the defect must be substantial or result in confusion over the actions you must take to fulfill the bankruptcy notice for you to have the opportunity to set aside the bankruptcy notice.
There are some important requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will therefore be invalid. The following provides some examples where these essential requirements have not been met:
- The creditor’s address on the bankruptcy notice must 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 itemised in an independent document attached to the notice.
The following specifies some situations where bankruptcy notice defects have not been serious enough to make them invalid:
- 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 greater than $5,000 when the order or judgements were pronounced;
- A bankruptcy notice must be based upon a final judgement or order that is presently 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 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 disqualify 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 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 need to proficiently demonstrate to the court the following two items:
- The counter-claim, set-off or cross demand is equal to or in excess of 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 realistic chance 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 make use of the opportunity to counter-claim, including any negative personal circumstances (for instance lack of evidence or legal counsel), will not suffice.
What is an Abuse of process?
An abuse of process occurs if you can substantiate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, in contrast to a real effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former is 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 exhibit evidence of collateral purpose or inappropriate pressure.
What If I believe I have grounds to act on one of these items above?
If you feel that you have a case for one of the abovementioned reasons to rebut 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:
- Application (Form B2); and.
You can get the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either acquire a final order or an interim order.
Final orders have to specify the ideal outcome you wish 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.
Conversely, an interim order must 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 may be: “The time for compliance with bankruptcy notice (BN00233) be extended 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 intend to make an application, it must be accompanied by an affidavit which details 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 very important that your affidavit must abide by rule 3.02 of the Rules, otherwise your application may be declined and your request for an extension of time to adhere to the bankruptcy notice may not be granted.
Filing your application.
When 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 some situations you can apply for a waiver of this fee.
Serving your documents.
Once you’ve submitted 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 hand it to them. If they refuse to receive the documents, the person serving them may put the document in the presence of the person to be served and verbally explain to the person what the documents entail.
If you are an organisation, you must personally visit a registered office of the organisation and deliver the documents to an individual servicing that organisation. You don’t have to give the documents to the organisations principal address, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s 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 confident whether you have grounds to set aside the bankruptcy notice, or you’re not sure whether you should spend the time and money to apply due to financial reasons, phone Bankruptcy Experts Tweed Coast on 1300 795 575 for free advice. Additionally, you can visit our website for additional information: www.bankruptcyexpertstweedcoast.com.au