If you have obtained a bankruptcy notice or court order you must take action quickly to avoid future suffering. Owing somebody money known here as a creditor, may be any individual or business to whom you owe money. If you’re unable to pay money to a creditor, the creditor will call the Australian Financial Security Authority (AFSA) who will in turn issue a bankruptcy notice demanding payment of that money.
Clearly, there is a threshold to the total amount of money owing to creditors before they can talk to the AFSA, and the minimum amount is $5,000. After the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.
It’s important 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:
- Fulfill the bankruptcy notice within the requested timeframe described 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 pronounced on the notice (normally 21 days).
Committing an act of bankruptcy suggests that you give your creditor the authority 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 a couple of ways; it may be validly served to you directly, by normal post, or hand delivered to your registered address. In some scenarios, a bankruptcy notice can be served in digital format, either through email or fax.
If it’s not plausible for a creditor to serve a bankruptcy notice using any of the above methods, a court order may be secured which allows creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To comply with a bankruptcy notice, you must do one of three things:
- You must pay in full the amount indicated in the bankruptcy notice; or
- Organise an agreement with the creditor, such as a payment plan over a specific time period. The creditor must accept the payment arrangements terms. It’s always encouraged that the agreement is made in writing so you have proof of the agreement.
- Get some insolvency advice. At this point, you must not delay and get some help. If you have a notice of bankruptcy, just give us a ring here at Bankruptcy Experts Coffs Harbour on 1300 795 575 for a Free Consultation.
It is vital to note that all of these actions must be taken inside the timeframe laid out 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 mustn’t be taken lightly however, considering that if there are inadequate grounds to make an application then you will be subject to pay all the creditors legal costs which only escalates 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. 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 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 substantiate that the debt claimed on your bankruptcy notice does not exist, you will need 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 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 produce evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.
Moreover, if you do not start 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 ability to lengthen 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 emerges 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 critical than others, and not all defects will make a bankruptcy notice invalid as these defects can be corrected at the discretion of the court under s 306( 1) of the Act.
Generally speaking, the defect must be significant or induce confusion over the actions you must take to follow the bankruptcy notice for you to have the capability 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 consequently be invalid. The following details some examples where these crucial 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 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 outlined 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 an independent document attached to the notice.
The following specifies some situations 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 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 lower 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 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 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 disqualify a bankruptcy notice, unless the debtor challenges the validity 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 have to properly 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 authentic 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 upon. 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 be sufficient.
What is an Abuse of process?
An abuse of process manifests if you can show 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 connection with bankruptcy. If the former holds true, then you will have the potential to set aside the bankruptcy notice caused by an abuse of process. To succeed using these grounds, you will need to present evidence of collateral purpose or unjustifiable pressure.
What If I think 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 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 apply for a final order or an interim order.
Final orders need to outline 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 provide a copy of the bankruptcy notice with your application.
Moreover, an interim order needs to summarise 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 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 outlines the grounds of your application as well as 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 satisfy rule 3.02 of the Rules, otherwise your application may be denied and your request for an extension of time to comply with 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 in person at the Federal Circuit Court Registry.
There is a lodging charge that will need to be paid, however in various situations 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 receive the documents, the individual serving them may put the document in the presence of the individual to be served and verbally notify the individual what the documents entail.
If you are an organisation, you must personally visit a registered office of the organisation and give the documents to a person servicing that business. You don’t need to give the documents to the organisations principal address, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.
If you want another person 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 clear whether you have grounds to set aside the bankruptcy notice, or you’re unsure whether you should devote the time and money to apply because of financial reasons, speak with Bankruptcy Experts Coffs Harbour on 1300 795 575 for free advice. Additionally, you can visit our website for more information: www.bankruptcyexpertscoffsharbour.com.au