If you have been given a bankruptcy notice or court order you must act right away to reduce future grief. Owing someone else money known here as a creditor, may be any individual or company to whom you owe money. If you’re unable to pay money to a creditor, the creditor will consult with the Australian Financial Security Authority (AFSA) who will consequently send a bankruptcy notice requesting payment of that money.
Historically, there is a threshold to the quantity of money owing to creditors before they can speak to the AFSA, and the minimum amount is $5,000. When the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.
It’s critical 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:
- Abide by the bankruptcy notice inside the requested timeframe mentioned 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 declared on the notice (normally 21 days).
Committing an act of bankruptcy implies that you give your creditor the authority to apply to the Federal Circuit Court for a sequestration order, or simply put, an order that will make you legally bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice can be served to you in a number of ways; it could be validly served to you personally, by regular post, or hand delivered to your registered address. In a number of situations, a bankruptcy notice may be served in digital format, either using fax or email.
If it’s not practical for a creditor to serve a bankruptcy notice using any of these sources, a court order can be obtained which makes it possible for creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To fulfill a bankruptcy notice, you must do one of three things:
- You must pay in full the amount detailed in the bankruptcy notice; or
- Work out an agreement with the creditor, such as a payment plan over a defined period of time. The creditor must accept the payment arrangements conditions. It’s always recommended 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, simply give us a ring here at Bankruptcy Experts Frankston on 1300 795 575 for a Free Consultation.
It is very important to note that all of these actions must be taken inside the timeframe reported 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 mustn’t be taken lightly however, because if there are unsatisfactory grounds to make an application then you will be responsible 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 an intelligent idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. Essentially, 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 sum 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 need to provide 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 convincing argument to do so. You must have already submitted the applicable documents with the court that handed down the order. Along with this, you must be able to provide evidence to the Federal Circuit Court that reveals that you have an authentic case for grounds of appeal.
Likewise, 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 have the ability to increase the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. For that 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 fulfill 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 void as these defects can be repaired at the discretion of the court under s 306( 1) of the Act.
Generally speaking, the defect must be serious or create confusion over the actions you must take to satisfy the bankruptcy notice for you to have the capability to set aside the bankruptcy notice.
There are some essential requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be invalid. The following lists some examples where these necessary 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 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 itemised in an independent 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 specified in an independent document attached to the notice.
The following lists some circumstances 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 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 lower than $5,000, provided that the total amount was higher 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 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 revoke a bankruptcy notice, unless the debtor challenges the validity 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 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 upon. Failure to capitalise on the opportunity to counter-claim, including any detrimental personal circumstances (such as lack of evidence or legal counsel), will not suffice.
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 legitimate effort by the creditor to invoke the court’s jurisdiction in connection with insolvency. If the former is true, then you will have the potential to set aside the bankruptcy notice due to an abuse of process. To succeed using these grounds, you will need to provide evidence of collateral purpose or undue pressure.
What If I believe I have grounds to act on one of these items above?
If you think 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 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 need to describe 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 have to present a copy of the bankruptcy notice with your application.
On the contrary, an interim order should describe 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 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 elect to make an application, it must be accompanied by an affidavit which illustrates 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 paramount that your affidavit must comply with rule 3.02 of the Rules, or else your application may be refused and your request for an extension of time to follow the bankruptcy notice may not be granted.
Filing your application.
Once your documents are finalised, they will need to be filed with the courts either online or in person at the Federal Circuit Court Registry.
There is a lodging fee 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 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 lodged.
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 choose not to take the documents, the person serving them may put the document in the presence of the individual to be served and verbally tell the person what the documents are.
If you are an organisation, you must personally go to a registered office of the business and present the documents to a person servicing that business. You don’t need to present the documents to the businesses principal address, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that businesses registered addresses.
If you wish 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 sure whether you have grounds to set aside the bankruptcy notice, or you’re unconvinced whether you should spend the time and money to apply as a result of financial reasons, reach out to Bankruptcy Experts Frankston on 1300 795 575 for free advice. Additionally, you can visit our website for additional information: www.bankruptcyexpertsfrankston.com.au