If you have acquired a bankruptcy notice or court order you must respond right away to minimise future grief. Owing somebody money referred to here as a creditor, may be any person or company to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will consult with the Australian Financial Security Authority (AFSA) who will subsequently dispense a bankruptcy notice demanding payment of that money.

Not surprisingly, there is a limit to the level of money owing to creditors before they can speak to the AFSA, and the minimum amount is $5,000. After the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.

It’s essential that you take prompt 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:

  • Comply with the bankruptcy notice inside 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 within the timeframe mentioned on the notice (normally 21 days).

Committing an act of bankruptcy suggests 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 could be served to you in a variety of ways; it could be validly served to you in person, by normal post, or hand delivered to your registered address. In special scenarios, a bankruptcy notice may be served in an electronic format, either by means of email or fax.

If it’s not achievable for a creditor to serve a bankruptcy notice using any of the above means, a court order may be secured which permits creditors to serve the bankruptcy notice in a different way.

I have a bankruptcy notice, now what?

To satisfy a bankruptcy notice, you must do one of three things:

  1. You must pay in full the amount listed in the bankruptcy notice; or
  2. Organise an agreement with the creditor, for example a payment plan over a specific time period. The creditor must agree to the payment arrangements terms. It’s always advocated that the agreement is made in writing so you have evidence of the agreement.
  3. Get someinsolvency advice. At this point, you must not delay and get some help. If you have a notice of bankruptcy, simply phone us here at Bankruptcy Experts Albury 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 warranted, you can apply to the court to have the bankruptcy notice set aside or cancelled. This should not be taken lightly however, because if there are unsatisfactory grounds to make an application then you will be subject to pay all the creditors legal expenses which only inflates 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 prolongs 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 last minute.

To have your bankruptcy notice set aside, one of the following conditions must apply:

  1. The debt claimed on the bankruptcy notice does not exist;
  2. There is a defect in the bankruptcy notice;
  3. 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
  4. 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 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 a genuine argument to do so. You must have already filed the appropriate documents with the court that handed down the order. Further, you must have the ability to supply evidence to the Federal Circuit Court that displays that you have a legitimate 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. For this 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 appears when the creditor has failed to satisfy 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 arduous than others, and not all defects will make a bankruptcy notice invalid as these defects can be remedied at the discretion of the court under s 306( 1) of the Act.

In most cases, the defect must be serious or induce confusion over the actions you must take to abide by the bankruptcy notice for you to have the ability to set aside the bankruptcy notice.

There are some crucial 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 necessary 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 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 itemised in an independent document attached to the notice.

The following outlines some situations 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 less than $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 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 six months of its issue. The only exception is if the Official Receiver (reg 4.02 A) has increased 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 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 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 need to properly demonstrate to the court the following two items:

  1. 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 certified and have a realistic likelihood of succeeding; and.
  2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor obtained the judgement on which the bankruptcy notice is based upon. Failure to take advantage of the opportunity to counter-claim, including any adversarial personal circumstances (for instance lack of evidence or legal advice), will not be sufficient.

What is an Abuse of process?

An abuse of process transpires if you can substantiate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of a legitimate effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former is true, then you will have the option to set aside the bankruptcy notice because of an abuse of process. To be successful using these grounds, you will need to produce evidence of collateral purpose or unwarranted 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 in order to apply for your bankruptcy notice to be set aside:.

  1. Application (Form B2); and.
  2. Affidavit.

Application.

You can find the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either request a final order or an interim order.

Final orders have to summarise the ideal outcome you want to receive and the legislative basis which the court can approve 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 present a copy of the bankruptcy notice with your application.

However, an interim order should 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 could 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.”.

Affidavit.

If you intend to make an application, it must be accompanied by an affidavit which illustrates the grounds of your application coupled 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 fulfill rule 3.02 of the Rules, otherwise your application may be rejected and your request for an extension of time to satisfy the bankruptcy notice may not be approved.

Filing your application.

After your documents are completed, 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 specific scenarios you can apply for a waiver of this fee.

Serving your documents.

Once you’ve submitted 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 hand it to them. If they decide not to receive the documents, the individual serving them may put the document in the presence of the individual to be served and verbally announce to the person what the documents entail.

If you are a business, you must personally visit a registered office of the business and deliver the documents to an individual servicing that organisation. You don’t need to hand over the documents to the organisations principal workplace, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that organisations registered addresses.

If you would prefer another person to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a fee.

Financial Advice.

If you’re not clear whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should invest the time and money to apply as a result of financial reasons, speak with Bankruptcy Experts Albury on 1300 795 575 for free advice. As an alternative, you can visit our website for additional details: www.bankruptcyexpertsalbury.com.au