If you have been given a bankruptcy notice or court order you must act right away to avoid future grief. Owing anybody money known here as a creditor, may be any individual or business to whom you owe money. If you’re not able to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will consequently dispense a bankruptcy notice requesting payment of that money.
Historically, there is a threshold to the level of money owing to creditors before they can call 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 very important that you take swift 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:
- Fulfill the bankruptcy notice within the requested timeframe specified on the notice (normally 21 days); or
- Apply to the courts to ask for the bankruptcy notice be cancelled or set aside in less than the timeframe presented on the notice (normally 21 days).
Committing an act of bankruptcy means that you give your creditor the permission to apply to the Federal Circuit Court for a sequestration order, or in other words, an order that will make you lawfully bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice may be served to you in a couple of ways; it may be validly served to you in person, by normal post, or hand delivered to your registered address. In a number of situations, a bankruptcy notice could be served in electronic format, either using email or fax.
If it’s not possible for a creditor to serve a bankruptcy notice using any of these methods, a court order may be obtained which allows 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 stated in the bankruptcy notice; or
- Organise an agreement with the creditor, such as a payment plan over a certain period. The creditor must accept the payment arrangements T&C’s. It’s always suggested 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 assistance. If you have a notice of bankruptcy, simply phone us here at Bankruptcy Experts Tennant Creek on 1300 795 575 for a Free Consultation.
It is necessary 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 however, simply because if there are unsatisfactory grounds to make an application then you will be under obligation to pay all the creditors legal costs 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 smart idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you evade 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 prove 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 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 filed the appropriate documents with the court that handed down the order. Additionally, you must have the capacity to present evidence to the Federal Circuit Court that shows that you have a genuine case for grounds of appeal.
Likewise, if you do not commence 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 lengthen 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 obey 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 serious than others, and not all defects will make a bankruptcy notice void as these defects can be fixed at the discretion of the court under s 306( 1) of the Act.
Often, the defect must be significant or inflict confusion over the actions you must take to satisfy 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 therefore be void. The following provides some examples where these fundamental 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 detailed 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 cited in a separate document attached to the notice.
The following details some cases where bankruptcy notice defects have not been serious 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 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 greater than $5,000 when the order or judgements were pronounced;.
- A bankruptcy notice must be founded 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 six months of its issue. The only exemption 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 annul a bankruptcy notice, unless 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 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 properly demonstrate to the court the following two items:
- The counter-claim, set-off or cross demand is equal to or greater than the total amount claimed by the creditor in the bankruptcy notice. You must also satisfy the court that these claims are legit 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 received the judgement on which the bankruptcy notice is based upon. Failure to take advantage of the opportunity to counter-claim, including any unfavourable personal circumstances (like lack of evidence or legal advice), will not be sufficient.
What is an Abuse of process?
An abuse of process ensues if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, in contrast to a real effort by the creditor to invoke the court’s jurisdiction in connection with insolvency. If the former holds true, then you will have the chance 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 excessive pressure.
What If I feel 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 contest your bankruptcy, you will need to get the following documents prepared, filed, and served for you 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 apply for a final order or an interim order.
Final orders have to describe the ideal result 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.
On the other hand, an interim order must detail 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 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 details 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 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.
As soon as your documents are finalised, they will need to be filed with the courts either online or in person 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 filed 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 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 refuse to receive the documents, the person serving them may place the document in the presence of the person to be served and verbally advise the person what the documents entail.
If you are a company, you must personally go to a registered office of the business and hand over the documents to a person servicing that organisation. You don’t have to give the documents to the organisations principal place of business, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that businesses 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 skeptical whether you should invest the time and money to apply due to financial reasons, get in touch with Bankruptcy Experts Tennant Creek on 1300 795 575 for free advice. As an alternative, you can visit our website for more information: www.bankruptcyexpertstennantcreek.com.au