If you have received a bankruptcy notice or court order you must take action rather quickly to prevent future grief. Owing anybody money referred to here as a creditor, may be any person or organisation to whom you owe money. If you’re unable to pay money to a creditor, the creditor will reach out to the Australian Financial Security Authority (AFSA) who will subsequently dispense a bankruptcy notice requesting payment of that money.
Historically, there is a limit to the total amount of money owing to creditors before they can consult with the AFSA, and the minimum amount is $5,000. After the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.
It’s paramount 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 mentioned on the notice (normally 21 days); or
– Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe declared on the notice (normally 21 days).
Committing an act of bankruptcy means that you give your creditor authorisation 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 several ways; it may be validly served to you in person, by regular post, or hand delivered to your registered address. In specific scenarios, a bankruptcy notice may be served in digital format, either by means of email or fax.
If it’s not achievable for a creditor to serve a bankruptcy notice using any of these means, a court order can be obtained which permits creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To fulfill a bankruptcy notice, you must do one of three things:
- You must pay in full the amount detailed in the bankruptcy notice; or
- Establish an agreement with the creditor, for example a payment plan over a defined time 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 confirmation 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, just give us a ring here at Bankruptcy Melbourne on 1300 879 867 for a Free Consultation.
It is vital to note that all of these actions must be taken inside the timeframe detailed 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 however, simply because if there are insufficient grounds to make an application then you will be responsible 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 sensible idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. Basically, 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 demonstrate that the debt claimed on your bankruptcy notice does not exist, you must deliver 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 persuasive argument to do so. You must have already filed the necessary documents with the court that handed down the order. Further, you must have the ability to supply evidence to the Federal Circuit Court that indicates that you have an authentic case for grounds of appeal.
Likewise, if you do not start 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 increase the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. As a result, 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 arduous than others, and not all defects will make a bankruptcy notice invalid as these defects can be corrected at the discretion of the court under s 306( 1) of the Act.
Typically, the defect must be significant or cause confusion over the actions you must take to fulfill the bankruptcy notice for you to have the opportunity 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 consequently be void. The following lists some examples where these imperative 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 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 detailed in a separate document attached to the notice.
The following details some situations 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 born 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 less than $5,000, provided that the total amount was in excess of $5,000 when the order or judgements were pronounced;.
– A bankruptcy notice must be formed 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 six months of its issue. The only exception 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 revoke a bankruptcy notice, except if 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 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 have to effectively 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 authentic 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 obtained the judgement on which the bankruptcy notice is based on. Failure to capitalise on the opportunity to counter-claim, including any unfavourable personal circumstances (for example lack of evidence or legal advice), will not be adequate.
What is an Abuse of process?
An abuse of process happens if you can establish that the reasons behind the bankruptcy notice is to pressure you to pay a debt, as opposed 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 potential 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 inappropriate pressure.
What If I find that I have grounds to act on one of these items above?
If you think you have a case for one of the previously mentioned reasons to contend 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 make an application for a final order or an interim order.
Final orders have to 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 have to supply a copy of the bankruptcy notice with your application.
Conversely, an interim order should specify 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 can 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 states 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 vital that your affidavit must fulfill rule 3.02 of the Rules, otherwise your application may be denied 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 finalised, they will need to be filed with the courts either online or personally 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 3 days after the documents have been filed.
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 individual serving them may put the document in the presence of the individual to be served and verbally instruct the person what the documents are.
If you are a company, you must personally go to a registered office of the organisation and hand the documents to an individual servicing that business. You don’t need to hand over the documents to the organisations principal place of business, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.
If you wish 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 sure whether you have grounds to set aside the bankruptcy notice, or you’re not sure whether you should invest the time and money to apply as a result of financial reasons, phone Bankruptcy Melbourne on 1300 879 867 for free advice. Alternatively, you can visit our website for more information: www.bankruptcymelbourne.com