If you have received a bankruptcy notice or court order you must respond immediately to prevent future distress. Owing someone else money known here as a creditor, may be any person or organisation to whom you owe money. If you’re unable to pay money to a creditor, the creditor will speak to the Australian Financial Security Authority (AFSA) who will consequently deliver a bankruptcy notice requesting payment of that money.
As to be expected, there is a threshold to the volume of money owing to creditors before they can get in touch with the AFSA, and the minimum amount is $5,000. When the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.
It’s extremely important that you take timely 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:
- Comply with the bankruptcy notice in less than the requested timeframe specified on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside inside 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 lawfully bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice may be served to you in a range of ways; it could be validly served to you in person, by ordinary post, or hand delivered to your registered address. In special situations, a bankruptcy notice could be served digitally, either via fax or email.
If it’s not possible for a creditor to serve a bankruptcy notice using any of these means, a court order may be obtained which enables 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 listed in the bankruptcy notice; or
- Arrange an agreement with the creditor, such as a payment plan over a specified period. The creditor must agree to the payment arrangements terms and conditions. It’s always recommended 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, just phone us here at Bankruptcy Experts Alice Springs 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 warranted, you can apply to the court to have the bankruptcy notice cancelled or set aside. This should not be taken lightly though, since if there are inadequate grounds to make an application then you will be under obligation to pay all the creditors legal expenses 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 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. Simply put, 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 level 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 prove that the debt claimed on your bankruptcy notice does not exist, you have to produce evidence that:
- You have in fact paid the creditor the amount owing under the order or judgement; or
- You have appealed the order by launching 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 an authentic argument to do so. You must have already filed the relevant documents with the court that handed down the order. Moreover, you must be able to produce evidence to the Federal Circuit Court that reveals that you have a legitimate case for grounds of appeal.
Moreover, if you do not commence 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 extend the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. Subsequently, 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 abide by the requirements of the Act, in which case you might have grounds to make an application for 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.
Typically, the defect must be serious or result in confusion over the actions you must take to abide by the bankruptcy notice for you to have the capability to set aside the bankruptcy notice.
There are some important requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be void. The following lists some examples where these essential 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 cited 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 describes some scenarios 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 (presuming 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 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 formed 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 invalidate a bankruptcy notice, except if the debtor disputes 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 6 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 successfully 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 certified and have a realistic chance 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 on. Failure to make use of the opportunity to counter-claim, including any adversarial personal circumstances (including lack of evidence or legal advice), will not be sufficient.
What is an Abuse of process?
An abuse of process ensues if you can prove 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 is true, then you will have the chance to set aside the bankruptcy notice because of an abuse of process. To succeed using these grounds, you will need to present evidence of collateral purpose or undue pressure.
What If I believe I have grounds to act on one of these items above?
If you feel you have a case for one of the previously mentioned reasons to rebut your bankruptcy, you will need to get the following documents prepared, filed, and served for you 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 need to summarise the ideal outcome you aspire to receive and the legislative basis which the court can grant 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 produce a copy of the bankruptcy notice with your application.
Moreover, an interim order needs to outline 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 could be: “The time for compliance with bankruptcy notice (BN00233) be prolonged 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 want to make an application, it must be accompanied by an affidavit which specifies 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 follow rule 3.02 of the Rules, otherwise your application may be declined and your request for an extension of time to satisfy the bankruptcy notice may not be approved.
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 fee that will need to be paid, however in specific 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 person identified on the document and give it to them. If they decide not to take the documents, the individual serving them may put the document in the presence of the person to be served and verbally explain to the individual what the documents are.
If you are a company, you must personally go to a registered office of the business and present the documents to a person servicing that company. You don’t need to hand over the documents to the businesses principal address, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.
If you would 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 clear whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should spend the time and money to apply as a result of financial reasons, get in touch with Bankruptcy Experts Alice Springs on 1300 795 575 for free advice. Additionally, you can visit our website for additional details: www.bankruptcyexpertsalicesprings.com.au