If you have acquired a bankruptcy notice or court order you must act immediately to minimise future grief. Owing anyone 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 speak to the Australian Financial Security Authority (AFSA) who will consequently dispense a bankruptcy notice demanding payment of that money.
Obviously, there is a threshold to the quantity of money owing to creditors before they can connect with the AFSA, and the minimum amount is $5,000. Soon after the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.
It’s extremely important that you take timely 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 described 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 authority to apply to the Federal Circuit Court for a sequestration order, or to put it simply, 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 range of ways; it could be validly served to you directly, by regular post, or hand delivered to your registered address. In a number of circumstances, a bankruptcy notice can be served in a digital format, either using fax or email.
If it’s not plausible for a creditor to serve a bankruptcy notice using any of the above means, a court order can be provided which makes it possible for 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 indicated in the bankruptcy notice; or
- Establish an agreement with the creditor, such as a payment plan over a certain period of time. The creditor must agree to the payment arrangements terms and conditions. It’s always advised that the agreement is made in writing so you have documentation of the agreement.
- Get some bankruptcy advice. At this point, you must not delay and get some recommendations. If you have a notice of bankruptcy, simply give us a call here at Bankruptcy Experts Gold Coast 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 must never be taken lightly though, simply because if there are inadequate grounds to make an application then you will be accountable to pay all the creditors legal fees which only amplifies 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 lengthens 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 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 volume 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 need to 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 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 a convincing argument to do so. You must have already filed the appropriate documents with the court that handed down the order. Along with this, you must have the ability to present evidence to the Federal Circuit Court that illustrates that you have a genuine case for grounds of appeal.
Secondly, if you do not commence the process of setting aside the judgement or order prior to filing your application to set aside the bankruptcy notice, the Federal Circuit Court will not have the ability to lengthen the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. Consequently, 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 adhere to 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 critical 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 general, the defect must be significant or result in confusion over the actions you must take to adhere to the bankruptcy notice for you to have the capability to set aside the bankruptcy notice.
There are some essential requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will therefore be invalid. The following provides some examples where these imperative requirements have not been met:
- The creditor’s address on the bankruptcy notice has 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 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 specified in an independent document attached to the notice.
The following outlines some situations where bankruptcy notice defects have not been considerable 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 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 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 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 disqualify a bankruptcy notice, except if the debtor disputes the credibility 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 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 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 upon. Failure to take advantage of the opportunity to counter-claim, including any damaging personal circumstances (like lack of evidence or legal counsel), will not be adequate.
What is an Abuse of process?
An abuse of process happens if you can substantiate 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 relation to bankruptcy. If the former holds true, then you will have the chance 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 undue 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 rebut your bankruptcy, you will need to get the following documents prepared, filed, and served so as to apply for your bankruptcy notice to be set aside:.
- Application (Form B2); and.
You can get the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either apply for a final order or an interim order.
Final orders have to describe the ideal outcome 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.
Alternatively, an interim order needs to specify 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 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 wish to make an application, it must be accompanied by an affidavit which details the grounds of your application as well as 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 critical that your affidavit must fulfill rule 3.02 of the Rules, or else your application may be refused and your request for an extension of time to comply with the bankruptcy notice may not be approved.
Filing your application.
After your documents are finished, 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 some scenarios 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 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 refuse to receive the documents, the individual serving them may put the document in the presence of the individual to be served and verbally tell the person what the documents entail.
If you are a business, you must personally visit a registered office of the company and deliver the documents to an individual servicing that organisation. 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 organisations 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 fee.
If you’re not sure whether you have grounds to set aside the bankruptcy notice, or you’re uncertain whether you should invest the time and money to apply resulting from financial reasons, talk to Bankruptcy Experts Gold Coast on 1300 879 867 for free advice. Additionally, you can visit our website for more information: www.bankruptcyexpertsgoldcoast.com.au