If you have received a bankruptcy notice or court order you must respond quickly to reduce future grief. Owing somebody money known 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 the Australian Financial Security Authority (AFSA) who will consequently dispense a bankruptcy notice demanding payment of that money.
Clearly, there is a limit to the total amount of money owing to creditors before they can contact the AFSA, and the minimum amount is $5,000. As soon as 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 within the requested timeframe stated 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 pronounced 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 simply put, an order that will make you legally bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice could be served to you in a number of ways; it can be validly served to you directly, by regular post, or hand delivered to your registered address. In specific situations, a bankruptcy notice could be served electronically, either using email or fax.
If it’s not achievable for a creditor to serve a bankruptcy notice using any of these sources, a court order can be attained 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 defined in the bankruptcy notice; or
- Arrange an agreement with the creditor, such as a payment plan over a specific period. The creditor must accept 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 assistance. If you have a notice of bankruptcy, just contact us here at Bankruptcy Experts Toowoomba on 1300 795 575 for a Free Consultation.
It is essential 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 warranted, you can apply to the court to have the bankruptcy notice cancelled or set aside. This should not be taken lightly though, considering that if there are insufficient grounds to make an application then you will be accountable to pay all the creditors legal fees which only enlarges 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 extends the timeframe for compliance with the bankruptcy notice, so you keep away from 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 validate that the debt claimed on your bankruptcy notice does not exist, you have 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 commencing 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 relevant documents with the court that handed down the order. Furthermore, you must be able to produce evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.
Further, 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 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 results when the creditor has failed to satisfy the requirements of the Act, in which case you may have grounds to make an application 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 remedied at the discretion of the court under s 306( 1) of the Act.
Usually, the defect must be considerable or create confusion over the actions you must take to follow the bankruptcy notice for you to have the capacity to set aside the bankruptcy notice.
There are some critical 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 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 stated 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 outlined in a separate document attached to the notice.
The following lists some cases where bankruptcy notice defects have not been substantial 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 less than $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 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 undermine a bankruptcy notice, unless the debtor contests 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 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 need to properly 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 genuine and have a reasonable 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 on. Failure to capitalise on the opportunity to counter-claim, including any adverse personal circumstances (for instance lack of evidence or legal advice), will not suffice.
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, in contrast to a real effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former holds true, then you will have the opportunity to set aside the bankruptcy notice due to an abuse of process. To be successful using these grounds, you will need to produce evidence of collateral purpose or unwarranted pressure.
What If I believe I have grounds to act on one of these items above?
If you feel 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 in order 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 obtain a final order or an interim order.
Final orders have to describe the ideal result you aspire 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 produce a copy of the bankruptcy notice with your application.
On the contrary, an interim order needs to outline 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 might be: “The time for compliance with bankruptcy notice (BN00233) be increased 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 stipulates the grounds of your application coupled 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 comply with the bankruptcy notice may not be granted.
Filing your application.
After your documents are finished, 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 circumstances 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 3 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 choose not to receive the documents, the person serving them may put the document in the presence of the individual to be served and verbally announce to the individual what the documents entail.
If you are a business, you must personally visit a registered office of the business and present the documents to a person servicing that company. You don’t need to deliver the documents to the organisations principal address, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.
If you would like 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 convinced whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should invest the time and money to apply due to financial reasons, talk with Bankruptcy Experts Toowoomba on 1300 795 575 for free advice. As an alternative, you can visit our website for additional details: www.bankruptcyexpertstoowoomba.com.au