If you have been given a bankruptcy notice or court order you must act promptly to reduce future pain. Owing anyone money known here as a creditor, could be any individual or business to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will contact the Australian Financial Security Authority (AFSA) who will subsequently issue a bankruptcy notice requesting payment of that money.
Not surprisingly, there is a threshold to the level of money owing to creditors before they can get in touch with the AFSA, and the minimum amount is $5,000. As soon as the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.
It’s extremely 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:
- Comply with the bankruptcy notice in less than the requested timeframe mentioned on the notice (normally 21 days); or
- Apply to the courts to ask for the bankruptcy notice be cancelled or set aside within the timeframe presented on the notice (normally 21 days).
Committing an act of bankruptcy indicates 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 could be served to you in a couple of ways; it could be validly served to you directly, by regular post, or hand delivered to your registered address. In specific scenarios, a bankruptcy notice could be served in an electronic format, either by means of fax or email.
If it’s not possible for a creditor to serve a bankruptcy notice using any of the above methods, a court order may be acquired which makes it possible for creditors to serve the bankruptcy notice in a separate 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 listed in the bankruptcy notice; or
- Set up an agreement with the creditor, for instance a payment plan over a defined timeframe. The creditor must agree to the payment arrangements T&C’s. It’s always advised that the agreement is made in writing so you have confirmation 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 give us a call here at Bankruptcy Experts Shellharbour on 1300 795 575 for a Free Consultation.
It is crucial to note that all of these actions must be taken within the timeframe specified 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 should not be taken lightly however, because if there are unsatisfactory grounds to make an application then you will be responsible 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 an intelligent idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you stay clear of committing an act of bankruptcy while the court processes your application. Essentially, 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 validate that the debt claimed on your bankruptcy notice does not exist, you must provide 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 genuine argument to do so. You must have already filed 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 a legitimate case for grounds of appeal.
Likewise, 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 be able to extend 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 occurs 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 weighty than others, and not all defects will make a bankruptcy notice void as these defects can be repaired at the discretion of the court under s 306( 1) of the Act.
In most cases, the defect must be serious or induce confusion over the actions you must take to abide by 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 subsequently be void. The following lists some examples where these vital 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 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 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 stated in an independent document attached to the notice.
The following lists 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 (presuming payment can be reasonably made to this address).
There are several other legal requirements that should be considered. 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 more than $5,000 when the order or judgements were pronounced;.
- A bankruptcy notice must be based on 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 exception 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 undermine a bankruptcy notice, unless the debtor contests 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 effectively demonstrate to the court the following two items:
- The counter-claim, set-off or cross demand is equal to or in excess of 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 possibility 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 on. Failure to capitalise on the opportunity to counter-claim, including any detrimental personal circumstances (for instance lack of evidence or legal advice), will not suffice.
What is an Abuse of process?
An abuse of process transpires if you can establish 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 bankruptcy. If the former is true, then you will have the potential to set aside the bankruptcy notice because of an abuse of process. To succeed using these grounds, you will need to supply evidence of collateral purpose or unwarranted 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 challenge your bankruptcy, you will need to get the following documents prepared, filed, and served in order 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 obtain a final order or an interim order.
Final orders have to outline 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 need to provide a copy of the bankruptcy notice with your application.
Moreover, an interim order needs to illustrate 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 wish to make an application, it must be accompanied by an affidavit which outlines the grounds of your application in conjunction 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 extremely important that your affidavit must abide by 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 granted.
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 fee that will need to be paid, however in certain scenarios 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 submitted.
If you are an individual, you must personally take the documents to the individual identified on the document and give it to them. If they decide not to take the documents, the person serving them may place the document in the presence of the person to be served and verbally inform the person what the documents entail.
If you are a business, you must personally go to a registered office of the company and deliver the documents to an individual servicing that company. You don’t have to present the documents to the organisations principal place of business, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.
If you prefer 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 confident whether you have grounds to set aside the bankruptcy notice, or you’re unsure whether you should spend the time and money to apply because of financial reasons, reach out to Bankruptcy Experts Shellharbour on 1300 795 575 for free advice. As an alternative, you can visit our website for additional information: www.bankruptcyexpertsshellharbour.com.au