If you have obtained a bankruptcy notice or court order you must take action right away to minimise future pain. Owing someone else money regarded here as a creditor, could be any person or organisation to whom you owe money. If you’re not able to pay money to a creditor, the creditor will call the Australian Financial Security Authority (AFSA) who will in turn dispense a bankruptcy notice demanding payment of that money.
As you would expect, there is a threshold to the level of money owing to creditors before they can consult 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 very important 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:
- Satisfy the bankruptcy notice inside the requested timeframe pronounced on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside within the timeframe declared on the notice (normally 21 days).
Committing an act of bankruptcy indicates that you give your creditor the authority 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 variety of ways; it may be validly served to you personally, by regular post, or hand delivered to your registered address. In specific scenarios, a bankruptcy notice may be served in an electronic format, either via fax or email.
If it’s not achievable for a creditor to serve a bankruptcy notice using any of these means, a court order can be acquired which enables creditors to serve the bankruptcy notice in a separate way.
I have a bankruptcy notice, now what?
To adhere to a bankruptcy notice, you must do one of three things:
- You must pay in full the amount cited in the bankruptcy notice; or
- Organise an agreement with the creditor, such as a payment plan over a specified period of time. The creditor must agree to the payment arrangements conditions. It’s always recommended 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 phone us here at Bankruptcy Experts Rockhampton 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 never be taken lightly however, since if there are insufficient grounds to make an application then you will be responsible to pay all the creditors legal expenses which only amplifies the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a sensible idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. In short, 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 validate that the debt claimed on your bankruptcy notice does not exist, you must 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 a persuasive argument to do so. You must have already submitted the relevant documents with the court that handed down the order. Furthermore, you must be able to present evidence to the Federal Circuit Court that illustrates that you have an authentic case for grounds of appeal.
Likewise, if you do not initiate 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 have the capacity to increase the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. Consequently, 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 comply with 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 severe than others, and not all defects will make a bankruptcy notice invalid as these defects can be repaired at the discretion of the court under s 306( 1) of the Act.
Commonly, the defect must be significant or cause confusion over the actions you must take to comply with the bankruptcy notice for you to have the capability to set aside the bankruptcy notice.
There are some vital requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will ultimately be invalid. The following details some examples where these imperative 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 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 stated in a separate document attached to the notice.
The following lists some circumstances where bankruptcy notice defects have not been substantial 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 noted. 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 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 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 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 annul 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 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 have 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 secured the judgement on which the bankruptcy notice is based on. Failure to benefit from the opportunity to counter-claim, including any negative personal circumstances (for instance lack of evidence or legal advice), will not suffice.
What is an Abuse of process?
An abuse of process transpires if you can demonstrate 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 connection with insolvency. If the former is true, then you will have the opportunity to set aside the bankruptcy notice as a result of an abuse of process. To succeed using these grounds, you will need to exhibit evidence of collateral purpose or unjustifiable pressure.
What If I think 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 dispute 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 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 must outline the ideal outcome you want to receive and the legislative basis which the court can approve 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 provide a copy of the bankruptcy notice with your application.
Alternatively, an interim order should 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 elect to make an application, it must be accompanied by an affidavit which describes the grounds of your application coupled 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 follow rule 3.02 of the Rules, or else your application may be denied and your request for an extension of time to follow the bankruptcy notice may not be approved.
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 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 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 lodged.
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 refuse to take the documents, the person serving them may place the document in the presence of the person to be served and verbally advise the individual what the documents entail.
If you are an organisation, you must personally visit a registered office of the business and hand over the documents to a person servicing that company. You don’t have to hand over the documents to the organisations principal business, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that businesses 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 fee.
If you’re not sure whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should devote the time and money to apply as a result of financial reasons, contact Bankruptcy Experts Rockhampton on 1300 795 575 for free advice. As an alternative, you can visit our website for additional details: www.bankruptcyexpertsrockhampton.com.au