If you have been given a bankruptcy notice or court order you must take action quickly to reduce future suffering. Owing someone else money referred to here as a creditor, can be any person or organisation to whom you owe money. If you’re unable to pay money to a creditor, the creditor will speak with the Australian Financial Security Authority (AFSA) who will in turn deliver a bankruptcy notice demanding payment of that money.
Naturally, there is a threshold to the total amount of money owing to creditors before they can consult the AFSA, and the minimum amount is $5,000. As soon as the creditor has secured a final judgment, AFSA will issue you with a bankruptcy notice.
It’s integral 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:
- Abide by the bankruptcy notice in less than the requested timeframe expressed 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 indicates that you give your creditor authority to apply to the Federal Circuit Court for a sequestration order, or to put it simply, 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 variety of ways; it can be validly served to you in person, by regular post, or hand delivered to your registered address. In specific situations, a bankruptcy notice could be served in a digital format, either by means of 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 secured which permits creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To adhere to a bankruptcy notice, you must do one of three things:
- You must pay in full the amount cited in the bankruptcy notice; or
- Work out an agreement with the creditor, for example a payment plan over a specified timeframe. 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 documentation of the agreement.
- Get some insolvency advice. At this point, you must not delay and get some assistance. If you have a notice of bankruptcy, simply phone us here at Bankruptcy Experts Whitsundays on 1300 795 575 for a Free Consultation.
It is vital 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 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 accountable to pay all the creditors legal expenses which only raises the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a practical idea to request that the court extends the timeframe for compliance with the bankruptcy notice, so you stay clear of committing an act of bankruptcy while the court processes your application. Basically, 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 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 establish that the debt claimed on your bankruptcy notice does not exist, you have to supply 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 submitted the necessary documents with the court that handed down the order. In addition to this, you must be able to produce evidence to the Federal Circuit Court that indicates that you have an authentic case for grounds of appeal.
At the same time, 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 be able to increase 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 apply 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 fixed at the discretion of the court under s 306( 1) of the Act.
Commonly, the defect must be considerable or cause confusion over the actions you must take to adhere to the bankruptcy notice for you to have the capability to set aside the bankruptcy notice.
There are some imperative requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be void. The following lists some examples where these imperative requirements have not been met:
- The creditor’s address on the bankruptcy notice should 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 specified 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 cited in a separate document attached to the notice.
The following outlines some situations where bankruptcy notice defects have not been significant 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 lower 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 based upon 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 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 annul a bankruptcy notice, except if the debtor disputes the validity 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 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 have to effectively 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 legitimate and have a realistic 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 upon. Failure to capitalise on 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 takes place if you can validate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of a genuine effort by the creditor to invoke the court’s jurisdiction in connection with bankruptcy. If the former holds true, then you will have the opportunity to set aside the bankruptcy notice because of an abuse of process. To be successful 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 think you have a case for one of the previously mentioned reasons to challenge 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 must illustrate the ideal result you want to receive and the legislative basis which the court can approve 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 supply a copy of the bankruptcy notice with your application.
Alternatively, an interim order must illustrate 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 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 want to make an application, it must be accompanied by an affidavit which details 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 imperative that your affidavit must adhere to rule 3.02 of the Rules, or else your application may be rejected and your request for an extension of time to comply with the bankruptcy notice may not be approved.
Filing your application.
Once your documents are finalised, they will need to be filed with the courts either online or personally at the Federal Circuit Court Registry.
There is a lodging charge 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 three days after the documents have been lodged.
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 choose not to receive the documents, the person serving them may put the document in the presence of the person to be served and verbally notify the person what the documents consist of.
If you are a business, you must personally visit a registered office of the organisation and hand over the documents to an individual servicing that business. You don’t have to hand the documents to the company’s principal address, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that organisations registered addresses.
If you wish 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 confident whether you have grounds to set aside the bankruptcy notice, or you’re unclear whether you should spend the time and money to apply because of financial reasons, call Bankruptcy Experts Whitsundays on 1300 795 575 for free advice. Additionally, you can visit our website for more information: www.bankruptcyexpertswhitsundays.com.au