If you have been given a bankruptcy notice or court order you must take action right away to prevent future suffering. Owing somebody money known here as a creditor, can be any individual or business to whom you owe money. If you’re not able to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will in turn issue a bankruptcy notice requesting payment of that money.
Typically, there is a limit to the amount of money owing to creditors before they can consult with the AFSA, and the minimum amount is $5,000. Soon after the creditor has acquired a final judgment, AFSA will issue you with a bankruptcy notice.
It’s 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:
- Abide by 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 in less than the timeframe described on the notice (normally 21 days).
Committing an act of bankruptcy signifies that you give your creditor the authority to apply to the Federal Circuit Court for a sequestration order, or in simple terms, 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 several ways; it may be validly served to you in person, by regular post, or hand delivered to your registered address. In a number of situations, a bankruptcy notice can be served in electronic format, either through email or fax.
If it’s not plausible for a creditor to serve a bankruptcy notice using any of these sources, a court order may be provided which permits creditors to serve the bankruptcy notice in a separate way.
I have a bankruptcy notice, now what?
To abide by 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, for example a payment plan over a specific time period. The creditor must accept the payment arrangements terms and conditions. It’s always advised that the agreement is made in writing so you have confirmation of the agreement.
- Get some bankruptcy advice. At this point, you must not delay and get some guidance. If you have a notice of bankruptcy, simply phone us here at Bankruptcy Experts Brisbane on 1300 795 575 for a Free Consultation.
It is crucial to note that all of these actions must be taken inside the timeframe mentioned in the bankruptcy notice (usually 21 days from the date of the notice).
Can I get my Bankruptcy Set Aside?
If justified, you can apply to the court to have the bankruptcy notice cancelled or set aside. This should never be taken lightly however, given that if there are inadequate grounds to make an application then you will be subject to pay all the creditors legal expenses which only bloats 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 prolongs 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 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 deliver evidence that:
- You have in fact paid the creditor the amount owing under the order or judgement; or
- You have appealed the order by commencing 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 filed the appropriate documents with the court that handed down the order. Along with this, you must be able to present evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.
Likewise, 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 be able to lengthen 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 occurs 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 serious than others, and not all defects will make a bankruptcy notice void as these defects can be addressed at the discretion of the court under s 306( 1) of the Act.
Generally, the defect must be substantial or result in confusion over the actions you must take to abide by the bankruptcy notice for you to have the capacity 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 therefore be invalid. The following provides some examples where these critical 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 stipulated 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 stipulated in an independent document attached to the notice.
The following outlines some situations where bankruptcy notice defects have not been significant 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 in excess of $5,000 when the order or judgements were pronounced;.
- A bankruptcy notice must be based on 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 extended 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, except if the debtor contests 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 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 legit and have a reasonable probability of succeeding; and.
- The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor received the judgement on which the bankruptcy notice is based on. Failure to make use of the opportunity to counter-claim, including any detrimental personal circumstances (such as lack of evidence or legal advice), will not suffice.
What is an Abuse of process?
An abuse of process ensues if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, as opposed to a real effort by the creditor to invoke the court’s jurisdiction in relation to insolvency. If the former is true, then you will have the potential to set aside the bankruptcy notice because of an abuse of process. To be successful using these grounds, you will need to deliver evidence of collateral purpose or inappropriate 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 contend your bankruptcy, you will need to get the following documents prepared, filed, and served so as 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 secure a final order or an interim order.
Final orders must illustrate the ideal outcome you aspire to receive and the legislative basis which the court can grant 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 have to provide a copy of the bankruptcy notice with your application.
Alternatively, an interim order must outline 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 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 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 abide by rule 3.02 of the Rules, or else your application may be declined and your request for an extension of time to comply with the bankruptcy notice may not be granted.
Filing your application.
When 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 some 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 three 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 hand it to them. If they decide not to take the documents, the person serving them may put the document in the presence of the person to be served and verbally instruct the individual what the documents are.
If you are a company, you must personally visit a registered office of the organisation and hand the documents to a person servicing that business. You don’t have to hand the documents to the company’s principal place of business, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.
If you want someone 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 certain 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, contact Bankruptcy Experts Brisbane on 1300 795 575 for free advice. As an alternative, you can visit our website for additional information: www.bankruptcyexpertsbrisbane.com.au