If you have acquired a bankruptcy notice or court order you must act quickly to reduce future grief. Owing anyone money known here as a creditor, could be any individual or company to whom you owe money. If you’re unable to pay money to a creditor, the creditor will contact the Australian Financial Security Authority (AFSA) who will consequently issue a bankruptcy notice requesting payment of that money.
Obviously, there is a limit to the quantity of money owing to creditors before they can approach the AFSA, and the minimum amount is $5,000. Immediately after the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.
It’s integral that you take immediate action if you receive a bankruptcy notice from the AFSA. You will commit an ‘act of bankruptcy’ if you fail to 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 request the bankruptcy notice be cancelled or set aside inside the timeframe expressed on the notice (normally 21 days).
Committing an act of bankruptcy indicates that you give your creditor permission to apply to the Federal Circuit Court for a sequestration order, or in simple terms, 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 several ways; it can be validly served to you individually, by ordinary post, or hand delivered to your registered address. In special situations, a bankruptcy notice could be served electronically, either through email or fax.
If it’s not attainable for a creditor to serve a bankruptcy notice using any of these sources, a court order may be secured which makes it possible for creditors to serve the bankruptcy notice in a different 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 detailed in the bankruptcy notice; or
- Organise an agreement with the creditor, for instance a payment plan over a defined period of time. The creditor must accept the payment arrangements terms. It’s always advocated 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 help. If you have a notice of bankruptcy, just call us here at Bankruptcy Experts Mackay on 1300 795 575 for a Free Consultation.
It is necessary to note that all of these actions must be taken within the timeframe stipulated 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 set aside or cancelled. This must never be taken lightly though, simply because if there are unsatisfactory grounds to make an application then you will be under obligation to pay all the creditors legal expenses 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 good idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you avoid 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 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 verify that the debt claimed on your bankruptcy notice does not exist, you need to produce 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 convincing argument to do so. You must have already submitted the necessary documents with the court that handed down the order. In addition to this, you must have the capacity to supply evidence to the Federal Circuit Court that establishes that you have an authentic case for grounds of appeal.
In addition, 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 increase the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. Subsequently, 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 obey 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 serious than others, and not all defects will make a bankruptcy notice invalid as these defects can be mended at the discretion of the court under s 306( 1) of the Act.
Typically, the defect must be considerable or result in confusion over the actions you must take to satisfy the bankruptcy notice for you to have the capacity 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 details some examples where these essential requirements have not been met:
- The creditor’s address on the bankruptcy notice needs to 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 itemised 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 an independent document attached to the notice.
The following details some circumstances where bankruptcy notice defects have not been serious 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 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 lower 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 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 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 challenges 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 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 properly 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 authenticated and have a realistic 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 take advantage of the opportunity to counter-claim, including any adversarial personal circumstances (for example lack of evidence or legal counsel), will not be adequate.
What is an Abuse of process?
An abuse of process transpires if you can show 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 relation 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 be successful using these grounds, you will need to supply evidence of collateral purpose or unnecessary pressure.
What If I feel that I have grounds to act on one of these items above?
If you believe you have a case for one of the previously mentioned reasons to rebut your bankruptcy, you will need to get the following documents prepared, filed, and served for you 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 specify the ideal outcome you want to receive and the legislative basis which the court can approve this decision. An example of a final order can 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 present a copy of the bankruptcy notice with your application.
Alternatively, an interim order has to detail 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 may be: “The time for compliance with bankruptcy notice (BN00233) be lengthened 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 describes 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 essential that your affidavit must adhere to rule 3.02 of the Rules, or else your application may be turned down and your request for an extension of time to comply with the bankruptcy notice may not be granted.
Filing your application.
As soon as 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 hand it to them. If they choose not to receive the documents, the individual serving them may put the document in the presence of the person to be served and verbally advise the individual what the documents consist of.
If you are an organisation, you must personally go to a registered office of the business and present the documents to an individual servicing that business. You don’t need to give the documents to the businesses principal address, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that organisations registered addresses.
If you would like 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 clear whether you have grounds to set aside the bankruptcy notice, or you’re skeptical whether you should devote the time and money to apply because of financial reasons, talk with Bankruptcy Experts Mackay on 1300 795 575 for free advice. As an alternative, you can visit our website for more information: www.bankruptcyexpertsmackay.com.au