If you have received a bankruptcy notice or court order you must act quickly to avoid future suffering. Owing someone else money referred to here as a creditor, can be any individual or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will consult with the Australian Financial Security Authority (AFSA) who will in turn send a bankruptcy notice demanding payment of that money.
Of course, there is a limit to the amount of money owing to creditors before they can phone the AFSA, and the minimum amount is $5,000. Once the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.
It’s crucial 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:
- Comply with the bankruptcy notice in less than the requested timeframe presented 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 specified 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 to put it simply, 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 couple of ways; it may be validly served to you personally, by ordinary post, or hand delivered to your registered address. In a number of circumstances, a bankruptcy notice can be served in digital format, either via fax or email.
If it’s not plausible for a creditor to serve a bankruptcy notice using any of the above methods, a court order can be acquired which permits creditors to serve the bankruptcy notice in a different 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 specificed in the bankruptcy notice; or
- Negotiate an agreement with the creditor, for example a payment plan over a specific timeframe. The creditor must agree to the payment arrangements terms and conditions. It’s always suggested 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 advice. If you have a notice of bankruptcy, simply phone us here at Bankruptcy Experts Port Macquarie on 1300 795 575 for a Free Consultation.
It is crucial 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 must never be taken lightly though, considering that if there are unsatisfactory grounds to make an application then you will be accountable to pay all the creditors legal expenses which only escalates the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always an intelligent 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. To put it simply, 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 level 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 need 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 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 necessary documents with the court that handed down the order. Along with this, you must have the ability to provide evidence to the Federal Circuit Court that reveals that you have a legitimate case for grounds of appeal.
Furthermore, 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 increase 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 happens when the creditor has failed to obey the requirements of the Act, in which case you may 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 amended at the discretion of the court under s 306( 1) of the Act.
In most cases, the defect must be serious or lead to 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 important requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be invalid. The following provides some examples where these vital 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 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 stated in a separate document attached to the notice.
The following outlines some scenarios where bankruptcy notice defects have not been substantial 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 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 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 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 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 disqualify a bankruptcy notice, except if the debtor disputes the legitimacy 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 greater 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 need 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 certified 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 attained 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 (including lack of evidence or legal counsel), will not be sufficient.
What is an Abuse of process?
An abuse of process materialises if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, rather than an honest effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former is true, then you will have the opportunity to set aside the bankruptcy notice resulting from an abuse of process. To be successful using these grounds, you will need to exhibit evidence of collateral purpose or unjustifiable pressure.
What If I think 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 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 acquire a final order or an interim order.
Final orders must illustrate the ideal result you aspire to receive and the legislative basis which the court can grant 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 need to supply a copy of the bankruptcy notice with your application.
Conversely, an interim order should outline 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 prolonged 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 summarises 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 imperative that your affidavit must fulfill rule 3.02 of the Rules, otherwise your application may be refused and your request for an extension of time to fulfill the bankruptcy notice may not be granted.
Filing your application.
As soon as your documents are completed, they will need to be filed with the courts either online or in person at the Federal Circuit Court Registry.
There is a lodging charge 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 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 submitted.
If you are an individual, you must personally take the documents to the individual identified on the document and hand 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 inform the person what the documents are.
If you are an organisation, 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 present the documents to the company’s principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that businesses registered addresses.
If you prefer someone 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 certain 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, talk to Bankruptcy Experts Port Macquarie on 1300 795 575 for free advice. Additionally, you can visit our website for additional details: www.bankruptcyexpertsportmacquarie.com.au