If you have acquired a bankruptcy notice or court order you must act rather quickly to reduce future distress. Owing someone money known here as a creditor, could be any individual or business to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will speak to the Australian Financial Security Authority (AFSA) who will consequently issue a bankruptcy notice requesting payment of that money.
As to be expected, there is a threshold to the volume of money owing to creditors before they can approach the AFSA, and the minimum amount is $5,000. Immediately after the creditor has acquired a final judgment, AFSA will issue you with a bankruptcy notice.
It’s paramount that you take prompt 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 in less than the requested timeframe presented on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe expressed on the notice (normally 21 days).
Committing an act of bankruptcy signifies that you give your creditor 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 may be served to you in a number of ways; it may 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 by means of fax or email.
If it’s not conceivable for a creditor to serve a bankruptcy notice using any of the above sources, a court order can be acquired which makes it possible for 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:
1. You must pay in full the amount specified in the bankruptcy notice; or
2. Establish an agreement with the creditor, for example a payment plan over a defined period. The creditor must agree to the payment arrangements conditions. It’s always advocated that the agreement is made in writing so you have confirmation of the agreement.
3. Get some bankruptcy advice. At this point, you must not delay and get some advice. If you have a notice of bankruptcy, just phone us here at Bankruptcy Experts on 1300 795 575 for a Free Consultation.
It is necessary to note that all of these actions must be taken within the timeframe mentioned 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 should never be taken lightly though, because if there are inadequate grounds to make an application then you will be liable to pay all the creditors legal fees which only enlarges the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a practical idea to request that the court extends the timeframe for compliance with the bankruptcy notice, so you avoid committing an act of bankruptcy while the court processes your application. Simply put, don’t leave it to the last minute.
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;
2. There is a defect in the bankruptcy notice;
3. 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
4. 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 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 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 genuine argument to do so. You must have already submitted the applicable documents with the court that handed down the order. Furthermore, you must have the ability to produce evidence to the Federal Circuit Court that establishes that you have a genuine case for grounds of appeal.
On top of that, if you do not commence 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 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 results when the creditor has failed to obey 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 repaired at the discretion of the court under s 306( 1) of the Act.
Normally, the defect must be serious or create confusion over the actions you must take to satisfy the bankruptcy notice for you to have the ability 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 subsequently be void. The following details some examples where these necessary 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 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 specified 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 outlined in a separate document attached to the notice.
The following outlines some situations 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 less than $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 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 six 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 undermine a bankruptcy notice, unless the debtor disputes 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 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 have to effectively 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 authentic and have a realistic probability of succeeding; and.
2. 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 upon. Failure to take advantage of the opportunity to counter-claim, including any detrimental personal circumstances (for instance lack of evidence or legal counsel), will not suffice.
What is an Abuse of process?
An abuse of process results if you can substantiate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, rather than 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 chance to set aside the bankruptcy notice caused by an abuse of process. To succeed using these grounds, you will need to exhibit evidence of collateral purpose or unjustifiable pressure.
What If I feel I have grounds to act on one of these items above?
If you believe you have a case for one of the abovementioned 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.
You can locate the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either apply for a final order or an interim order.
Final orders need to specify the ideal outcome you aspire 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 produce a copy of the bankruptcy notice with your application.
Alternatively, an interim order needs to illustrate 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 can 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 wish to make an application, it must be accompanied by an affidavit which illustrates 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 very important that your affidavit must adhere to rule 3.02 of the Rules, otherwise your application may be denied and your request for an extension of time to follow the bankruptcy notice may not be granted.
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 charge that will need to be paid, however in certain circumstances 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 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 refuse to take the documents, the individual serving them may put the document in the presence of the person 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 hand over the documents to a person servicing that organisation. You don’t have to present the documents to the company’s principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.
If you prefer somebody 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 uncertain whether you should devote the time and money to apply as a result of financial reasons, get in contact with Bankruptcy Experts on 1300 795 575 for free advice. Alternatively, you can visit our website for more information: www.bankruptcyexperts.com.au