If you have been given a bankruptcy notice or court order you must respond quickly to prevent future suffering. Owing somebody money known here as a creditor, may be any person or business to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will reach out to the Australian Financial Security Authority (AFSA) who will consequently dispense a bankruptcy notice requesting payment of that money.
As you would expect, there is a limit to the level of money owing to creditors before they can phone 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 vital 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:
- Fulfill the bankruptcy notice in less than the requested timeframe described on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe specified on the notice (normally 21 days).
Committing an act of bankruptcy signifies that you give your creditor permission 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 several ways; it can be validly served to you directly, by regular post, or hand delivered to your registered address. In certain scenarios, a bankruptcy notice can be served in a digital format, either through fax or email.
If it’s not achievable for a creditor to serve a bankruptcy notice using any of these methods, a court order can be attained which makes it possible for creditors to serve the bankruptcy notice in a separate 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 indicated in the bankruptcy notice; or
- Organise an agreement with the creditor, such as a payment plan over a defined timeframe. The creditor must agree to the payment arrangements terms. It’s always encouraged that the agreement is made in writing so you have evidence of the agreement.
- Get some bankruptcy advice. At this point, you must not delay and get some assistance. If you have a notice of bankruptcy, just contact us here at Bankruptcy Experts Adelaide 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 cited 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 must never be taken lightly though, because if there are insufficient grounds to make an application then you will be subject to pay all the creditors legal costs which only bloats the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a smart idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you refrain from committing an act of bankruptcy while the court processes your application. Simply put, 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 demonstrate that the debt claimed on your bankruptcy notice does not exist, you must 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 a convincing argument to do so. You must have already filed the applicable documents with the court that handed down the order. Furthermore, you must be able to produce evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.
Secondly, if you do not initiate 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 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 emerges when the creditor has failed to satisfy 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 arduous 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 considerable or create confusion over the actions you must take to comply with the bankruptcy notice for you to have the ability to set aside the bankruptcy notice.
There are some fundamental requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be void. The following details some examples where these fundamental requirements have not been met:
- The creditor’s address on the bankruptcy notice must 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 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 a separate document attached to the notice.
The following details 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 (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 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 based upon 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 six months of its issue. The only exemption 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 disqualify a bankruptcy notice, unless 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 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 need 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 likelihood of succeeding; and.
- The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor acquired the judgement on which the bankruptcy notice is based on. Failure to capitalise on the opportunity to counter-claim, including any damaging personal circumstances (for instance lack of evidence or legal advice), will not be adequate.
What is an Abuse of process?
An abuse of process manifests if you can establish 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 relation to insolvency. If the former is true, then you will have the opportunity to set aside the bankruptcy notice because of an abuse of process. To succeed using these grounds, you will need to provide evidence of collateral purpose or unjustifiable pressure.
What If I think I have grounds to act on one of these items above?
If you believe 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 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 request a final order or an interim order.
Final orders have to illustrate the ideal result you want to receive and the legislative basis which the court can grant this decision. An example of a final order can 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 provide a copy of the bankruptcy notice with your application.
On the other hand, an interim order must describe 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 can 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 elect 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 imperative that your affidavit must comply with rule 3.02 of the Rules, or else your application may be declined and your request for an extension of time to abide by the bankruptcy notice may not be approved.
Filing your application.
Once 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 various situations 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 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 choose not to take the documents, the person serving them may put the document in the presence of the person to be served and verbally inform the individual what the documents entail.
If you are a company, you must personally visit a registered office of the company and hand the documents to an individual servicing that business. You don’t have to give the documents to the company’s principal place of business, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that organisations registered addresses.
If you 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 cost.
If you’re not confident whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should spend the time and money to apply due to financial reasons, talk to Bankruptcy Experts Adelaide on 1300 795 575 for free advice. Additionally, you can visit our website for more information: www.bankruptcyexpertsadelaide.com.au