If you have obtained a bankruptcy notice or court order you must respond rather quickly to reduce future suffering. Owing somebody money known here as a creditor, can be any person or business to whom you owe money. If you’re not able to pay money to a creditor, the creditor will consult the Australian Financial Security Authority (AFSA) who will subsequently dispense a bankruptcy notice requesting payment of that money.
Obviously, there is a threshold to the quantity of money owing to creditors before they can connect with the AFSA, and the minimum amount is $5,000. After the creditor has obtained a final judgment, AFSA will issue you with a bankruptcy notice.
It’s integral that you take timely 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 inside the requested timeframe expressed 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 stated 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 can be served to you in a number of ways; it may be validly served to you personally, by regular post, or hand delivered to your registered address. In specific situations, a bankruptcy notice can be served electronically, either through fax or email.
If it’s not attainable for a creditor to serve a bankruptcy notice using any of these means, a court order may be acquired which permits 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
- Arrange an agreement with the creditor, for example a payment plan over a specified period of time. The creditor must agree to the payment arrangements T&C’s. It’s always advised that the agreement is made in writing so you have confirmation 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 Emerald on 1300 795 575 for a Free Consultation.
It is very important to note that all of these actions must be taken within the timeframe reported 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 not be taken lightly though, 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 increases the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a clever idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you keep away from 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 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 validate that the debt claimed on your bankruptcy notice does not exist, you will need to 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 filed the applicable documents with the court that handed down the order. Moreover, you must be able to provide evidence to the Federal Circuit Court that establishes that you have an authentic case for grounds of appeal.
Further, if you do not start 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 extend 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 abide by the requirements of the Act, in which case you might have grounds to apply 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 corrected at the discretion of the court under s 306( 1) of the Act.
Generally, the defect must be considerable or inflict 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 imperative requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be invalid. The following provides some examples where these crucial requirements have not been met:
- The creditor’s address on the bankruptcy notice needs 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 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 itemised in an independent document attached to the notice
The following lists some circumstances where bankruptcy notice defects have not been significant enough to make them invalid:
- 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 higher than $5,000 when the order or judgements were pronounced;
- A bankruptcy notice must be founded 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 6 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, unless the debtor contests the legitimacy 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 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 successfully 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 authentic 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 upon. Failure to take advantage of the opportunity to counter-claim, including any damaging personal circumstances (like lack of evidence or legal advice), will not be adequate.
What is an Abuse of process?
An abuse of process manifests if you can validate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, in contrast to a genuine effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former is true, then you will have the potential to set aside the bankruptcy notice as a result of an abuse of process. To succeed using these grounds, you will need to present evidence of collateral purpose or unjustifiable pressure.
What If I find that I have grounds to act on one of these items above?
If you feel 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 find the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either obtain a final order or an interim order.
Final orders must detail the ideal result you wish to receive and the legislative basis which the court can grant this decision. An example of a final order might 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 supply a copy of the bankruptcy notice with your application.
Moreover, an interim order must 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 might 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 intend 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 crucial that your affidavit must satisfy rule 3.02 of the Rules, or else your application may be refused and your request for an extension of time to comply with the bankruptcy notice may not be approved.
Filing your application.
As soon as your documents are finalised, 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 charge that will need to be paid, however in specific situations you can apply for a waiver of this fee.
Serving your documents.
Once you’ve lodged 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 person identified on the document and hand 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 instruct the person what the documents consist of.
If you are a business, you must personally go to a registered office of the business and present the documents to a person servicing that business. You don’t have to give the documents to the businesses principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.
If you prefer 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 convinced 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, phone Bankruptcy Experts Emerald on 1300 795 575 for free advice. Additionally, you can visit our website for additional details: www.bankruptcyexpertsemerald.com.au