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- September 28, 2017
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If you have acquired a bankruptcy notice or court order you must take action rather quickly to reduce future suffering. Owing anybody money known here as a creditor, may be any person or business to whom you owe money. If you’re unable to pay money to a creditor, the creditor will speak with the Australian Financial Security Authority (AFSA) who will in turn deliver a bankruptcy notice requesting payment of that money.
As expected, there is a limit to the level of money owing to creditors before they can consult with the AFSA, and the minimum amount is $5,000. When the creditor has secured 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:
- Adhere to the bankruptcy notice in less than the requested timeframe presented on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside within the timeframe expressed on the notice (normally 21 days).
Committing an act of bankruptcy implies that you give your creditor the permission to apply to the Federal Circuit Court for a sequestration order, or to put it simply, 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 couple of ways; it can be validly served to you directly, by normal post, or hand delivered to your registered address. In specific scenarios, a bankruptcy notice may be served in a digital format, 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 provided which allows creditors to serve the bankruptcy notice in a different 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 detailed in the bankruptcy notice; or
- Work out an agreement with the creditor, for instance a payment plan over a specific timeframe. The creditor must agree to the payment arrangements conditions. It’s always advised that the agreement is made in writing so you have confirmation of the agreement.
- Get some insolvency advice. At this point, you must not delay and get some recommendations. If you have a notice of bankruptcy, just phone us here at Bankruptcy Experts Gladstone on 1300 795 575 for a Free Consultation.
It is very important to note that all of these actions must be taken within the timeframe laid out 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 never be taken lightly however, simply because if there are inadequate grounds to make an application then you will be subject to pay all the creditors legal costs which only increases the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a clever idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you stay clear of committing an act of bankruptcy while the court processes your application. In other words, 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 amount 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 substantiate that the debt claimed on your bankruptcy notice does not exist, you will 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 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 filed the relevant documents with the court that handed down the order. Along with this, you must have the capacity to supply evidence to the Federal Circuit Court that illustrates that you have a legitimate case for grounds of appeal.
Secondly, if you do not begin 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 be able to extend 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 appears when the creditor has failed to adhere to 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 severe than others, and not all defects will make a bankruptcy notice invalid as these defects can be addressed at the discretion of the court under s 306( 1) of the Act.
Typically, the defect must be serious or lead to confusion over the actions you must take to adhere to the bankruptcy notice for you to have the ability 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 void. The following provides some examples where these essential 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 cited 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 stated in an independent document attached to the notice.
The following lists some situations where bankruptcy notice defects have not been serious 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 (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 below $5,000, provided that the total amount was higher than $5,000 when the order or judgements were pronounced;.
- A bankruptcy notice must be founded 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 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 invalidate a bankruptcy notice, except if 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 greater than 6 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 proficiently 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 realistic 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 make use of the opportunity to counter-claim, including any unfavourable personal circumstances (such as lack of evidence or legal counsel), will not be sufficient.
What is an Abuse of process?
An abuse of process takes place if you can show that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of a legitimate effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former is true, then you will have the chance to set aside the bankruptcy notice due to an abuse of process. To succeed using these grounds, you will need to deliver evidence of collateral purpose or unjustifiable pressure.
What If I think 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 dispute your bankruptcy, you will need to get the following documents prepared, filed, and served 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 want 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 need to present a copy of the bankruptcy notice with your application.
Conversely, an interim order has 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 can 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 intend to make an application, it must be accompanied by an affidavit which specifies 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 imperative that your affidavit must satisfy rule 3.02 of the Rules, otherwise your application may be rejected 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 completed, they will need to be filed with the courts either online or face to face at the Federal Circuit Court Registry.
There is a lodging fee that will need to be paid, however in some 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 lodged.
If you are an individual, you must personally take the documents to the person identified on the document and hand it to them. If they choose not to receive the documents, the person serving them may put the document in the presence of the person to be served and verbally inform the person what the documents are.
If you are an organisation, you must personally visit a registered office of the organisation and deliver the documents to a person servicing that business. You don’t need to present the documents to the organisations principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.
If you would 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 fee.
If you’re not confident whether you have grounds to set aside the bankruptcy notice, or you’re unclear whether you should spend the time and money to apply as a result of financial reasons, speak to Bankruptcy Experts Gladstone on 1300 795 575 for free advice. Additionally, you can visit our website for additional information: www.bankruptcyexpertsgladstone.com.au