If you have obtained a bankruptcy notice or court order you must respond promptly to prevent future pain. Owing somebody money known here as a creditor, may be any individual or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will talk to the Australian Financial Security Authority (AFSA) who will in turn deliver a bankruptcy notice demanding payment of that money.
Clearly, 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. As soon as the creditor has acquired a final judgment, AFSA will issue you with a bankruptcy notice.
It’s integral that you take prompt 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:
- Adhere to the bankruptcy notice within 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 inside the timeframe declared on the notice (normally 21 days).
Committing an act of bankruptcy signifies that you give your creditor the permission 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 a range of ways; it can be validly served to you in person, by normal post, or hand delivered to your registered address. In special situations, a bankruptcy notice may be served in electronic format, either by means of email or fax.
If it’s not practical for a creditor to serve a bankruptcy notice using any of these sources, a court order may be provided which allows creditors to serve the bankruptcy notice in a separate way.
I have a bankruptcy notice, now what?
To satisfy 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 T&C’s. It’s always advised that the agreement is made in writing so you have documentation 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 Wyong 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 justified, you can apply to the court to have the bankruptcy notice set aside or cancelled. This mustn’t be taken lightly though, since if there are unsatisfactory grounds to make an application then you will be obligated to pay all the creditors legal fees 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 sensible idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you steer clear of committing an act of bankruptcy while the court processes your application. To put it simply, 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 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 an authentic argument to do so. You must have already submitted the applicable documents with the court that handed down the order. Further, you must be able to produce evidence to the Federal Circuit Court that illustrates that you have a legitimate case for grounds of appeal.
In addition, if you do not begin 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 be able to lengthen 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 comply with 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 critical than others, and not all defects will make a bankruptcy notice void as these defects can be mended at the discretion of the court under s 306( 1) of the Act.
In general, the defect must be serious or inflict confusion over the actions you must take to adhere to the bankruptcy notice for you to have the opportunity 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 void. The following lists some examples where these essential 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 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 detailed 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 outlined in an independent document attached to the notice.
The following outlines some cases 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 (presuming payment can be reasonably made to this address).
There are several other legal requirements that should be kept in mind. 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 less 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 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 exception 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 invalidate a bankruptcy notice, except if the debtor challenges the legitimacy of the notice in less than the timeframe for compliance (s 41( 5)); and.
- The order or judgment on which the bankruptcy notice is based can not be more 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 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 reasonable probability 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 on. 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 sufficient.
What is an Abuse of process?
An abuse of process materialises if you can show that the reasons behind the bankruptcy notice is to pressure you to pay a debt, rather than a genuine effort by the creditor to invoke the court’s jurisdiction in connection with bankruptcy. 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 exhibit evidence of collateral purpose or inappropriate pressure.
What If I feel that I have grounds to act on one of these items above?
If you find that you have a case for one of the previously mentioned reasons to contend your bankruptcy, you will need to get the following documents prepared, filed, and served in order to apply for your bankruptcy notice to be set aside:
- Application (Form B2); and.
You can locate 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 have to detail the ideal outcome you want 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 have to supply a copy of the bankruptcy notice with your application.
Conversely, an interim order must specify 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 may be: “The time for compliance with bankruptcy notice (BN00233) be lengthened 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 states 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 vital that your affidavit must abide by rule 3.02 of the Rules, otherwise your application may be turned down and your request for an extension of time to satisfy the bankruptcy notice may not be granted.
Filing your application.
When your documents are finished, 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 fee that will need to be paid, however in certain circumstances 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 3 days after the documents have been submitted.
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 a business, you must personally go to a registered office of the organisation and present the documents to a person servicing that business. You don’t have to hand the documents to the organisations principal workplace, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.
If you wish 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 hesitant whether you should invest the time and money to apply resulting from financial reasons, speak to Bankruptcy Experts Wyong on 1300 795 575 for free advice. As an alternative, you can visit our website for additional information: www.bankruptcyexpertswyong.com.au