If you have been given a bankruptcy notice or court order you must act promptly to prevent future pain. Owing someone money known here as a creditor, can be any person or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will connect with the Australian Financial Security Authority (AFSA) who will subsequently issue a bankruptcy notice demanding payment of that money.
As expected, there is a limit to the volume of money owing to creditors before they can connect with the AFSA, and the minimum amount is $5,000. Immediately after the creditor has attained a final judgment, AFSA will issue you with a bankruptcy notice.
It’s paramount that you take immediate 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:
- Comply with 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 in less than the timeframe pronounced on the notice (normally 21 days).
Committing an act of bankruptcy suggests that you give your creditor the authority to apply to the Federal Circuit Court for a sequestration order, or in other words, an order that will make you legally bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice may be served to you in a variety of ways; it can be validly served to you individually, by ordinary post, or hand delivered to your registered address. In some situations, a bankruptcy notice can be served in electronic format, either via email or fax.
If it’s not conceivable for a creditor to serve a bankruptcy notice using any of these sources, a court order may 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 abide by a bankruptcy notice, you must do one of three things:
- You must pay in full the amount detailed in the bankruptcy notice; or
- Set up an agreement with the creditor, for instance a payment plan over a specific period. The creditor must accept the payment arrangements terms and conditions. It’s always advised that the agreement is made in writing so you have proof of the agreement.
- Get some bankruptcy advice. At this point, you must not delay and get some help. If you have a notice of bankruptcy, just contact us here at Bankruptcy Experts Townsville on 1300 795 575 for a Free Consultation.
It is crucial to note that all of these actions must be taken inside the timeframe listed 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 cancelled or set aside. This should not 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 increases 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 prolongs 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 amount 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 will need 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 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 a convincing argument to do so. You must have already submitted the appropriate 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 shows that you have an authentic case for grounds of appeal.
Secondly, 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 capacity 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 arises 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 severe 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.
Often, the defect must be substantial or create 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 crucial requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will ultimately be void. The following lists some examples where these imperative 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 cited 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 stipulated in a separate document attached to the notice.
The following details some scenarios where bankruptcy notice defects have not been considerable 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 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 more 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 6 months of its issue. The only exemption is if the Official Receiver (reg 4.02 A) has extended 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 invalidate 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 greater than the total amount claimed by the creditor in the bankruptcy notice. You must also satisfy the court that these claims are genuine 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 secured the judgement on which the bankruptcy notice is based upon. Failure to take advantage of the opportunity to counter-claim, including any negative personal circumstances (including lack of evidence or legal counsel), will not be sufficient.
What is an Abuse of process?
An abuse of process results if you can validate 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 chance to set aside the bankruptcy notice caused by an abuse of process. To be successful using these grounds, you will need to deliver evidence of collateral purpose or inappropriate pressure.
What If I feel 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 dispute 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 locate the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either make an application for a final order or an interim order.
Final orders need to 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 could 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.
Alternatively, an interim order needs 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 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 intend to make an application, it must be accompanied by an affidavit which states the grounds of your application along 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, or else your application may be refused 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 personally at the Federal Circuit Court Registry.
There is a lodging fee that will need to be paid, however in certain 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 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 person serving them may place the document in the presence of the individual to be served and verbally explain to the individual what the documents are.
If you are an organisation, you must personally visit a registered office of the company and hand over the documents to a person servicing that company. You don’t have to deliver the documents to the organisations principal business, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that organisations registered addresses.
If you want 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.
If you’re not confident whether you have grounds to set aside the bankruptcy notice, or you’re hesitant whether you should devote the time and money to apply due to financial reasons, talk to Bankruptcy Experts Townsville on 1300 795 575 for free advice. Additionally, you can visit our website for more information: www.bankruptcyexpertstownsville.com.au