If you have acquired a bankruptcy notice or court order you must act immediately to prevent future distress. Owing somebody money known here as a creditor, may be any person or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will subsequently deliver a bankruptcy notice requesting payment of that money.
As you would expect, there is a limit 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 acquired a final judgment, AFSA will issue you with a bankruptcy notice.
It’s very important 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 within the requested timeframe pronounced on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe expressed on the notice (normally 21 days).
Committing an act of bankruptcy means that you give your creditor authority to apply to the Federal Circuit Court for a sequestration order, or in simple terms, an order that will make you lawfully bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice could be served to you in a number of ways; it may be validly served to you individually, by ordinary post, or hand delivered to your registered address. In specific circumstances, a bankruptcy notice can be served digitally, either via email or fax.
If it’s not practical for a creditor to serve a bankruptcy notice using any of these methods, a court order can be attained which permits 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 cited in the bankruptcy notice; or
- Establish an agreement with the creditor, for instance a payment plan over a specific timeframe. The creditor must accept the payment arrangements 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, just contact us here at Bankruptcy Experts Gympie on 1300 795 575 for a Free Consultation.
It is vital to note that all of these actions must be taken within the timeframe cited 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, given that if there are insufficient grounds to make an application then you will be obligated to pay all the creditors legal expenses which only enlarges the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a wise 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. Essentially, 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 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 substantiate that the debt claimed on your bankruptcy notice does not exist, you have 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 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 genuine argument to do so. You must have already submitted the relevant documents with the court that handed down the order. In addition to this, you must have the ability to provide evidence to the Federal Circuit Court that reveals that you have a genuine case for grounds of appeal.
At the same time, if you do not begin 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 ability to extend the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. For that 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 emerges when the creditor has failed to abide by the requirements of the Act, in which case you might have grounds to request the bankruptcy notice to be set aside. Some defects are more weighty than others, and not all defects will make a bankruptcy notice invalid as these defects can be corrected at the discretion of the court under s 306( 1) of the Act.
Generally speaking, the defect must be serious or inflict confusion over the actions you must take to satisfy the bankruptcy notice for you to have the opportunity 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 invalid. The following details some examples where these vital 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 stipulated 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 detailed in a separate document attached to the notice.
The following outlines some cases where bankruptcy notice defects have not been serious 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 born 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 below $5,000, provided that the total amount was more 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 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 revoke a bankruptcy notice, except if the debtor challenges 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 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 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 chance of succeeding; and.
- 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 detrimental personal circumstances (for example lack of evidence or legal advice), will not be sufficient.
What is an Abuse of process?
An abuse of process takes place if you can prove that the reasons behind the bankruptcy notice is to pressure you to pay a debt, in contrast to an honest effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former holds true, then you will have the opportunity to set aside the bankruptcy notice due to an abuse of process. To be successful using these grounds, you will need to present evidence of collateral purpose or unjustifiable pressure.
What If I believe I have grounds to act on one of these items above?
If you find 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 if you want 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 wish 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 produce a copy of the bankruptcy notice with your application.
Moreover, an interim order has to detail 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 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 want to make an application, it must be accompanied by an affidavit which summarises the grounds of your application together 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 very important that your affidavit must adhere to 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 granted.
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 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 give it to them. If they refuse to take the documents, the person serving them may put the document in the presence of the person to be served and verbally announce to the person what the documents consist of.
If you are a business, you must personally visit a registered office of the company and hand over the documents to a person servicing that business. You don’t have to hand over the documents to the company’s principal address, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.
If you would like another person to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a cost.
If you’re not satisfied whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should invest the time and money to apply resulting from financial reasons, talk to Bankruptcy Experts Gympie on 1300 795 575 for free advice. Alternatively, you can visit our website for more information: www.bankruptcyexpertsgympie.com.au