Everything you should know about Bankruptcy Notices

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Bankruptcy,Bankruptcy Advice,InsolvencyIf you have received a bankruptcy notice or court order you must respond promptly to prevent future grief. Owing anybody money known here as a creditor, could be any individual or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will speak with the Australian Financial Security Authority (AFSA) who will consequently send a bankruptcy notice demanding payment of that money.

Clearly, there is a limit to the volume of money owing to creditors before they can contact the AFSA, and the minimum amount is $5,000. As soon as the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.

It’s extremely important that you take immediate 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 within the requested timeframe described on the notice (normally 21 days); or
  • Apply to the courts to ask for the bankruptcy notice be cancelled or set aside inside the timeframe mentioned 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 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 a variety of ways; it can be validly served to you individually, by normal post, or hand delivered to your registered address. In special situations, a bankruptcy notice could be served in electronic format, either using fax or email.

If it’s not practical for a creditor to serve a bankruptcy notice using any of these methods, a court order can be attained 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:

  1. You must pay in full the amount detailed in the bankruptcy notice; or
  2. Work out an agreement with the creditor, for instance a payment plan over a specified timeframe. The creditor must agree to the payment arrangements terms and conditions. It’s always encouraged that the agreement is made in writing so you have evidence of the agreement.
  3. Get some bankruptcy advice. At this point, you must not delay and get some assistance. If you have a notice of bankruptcy, just give us a ring here at Bankruptcy Advice Perth on 1300 879 867 for a Free Consultation.

It is crucial to note that all of these actions must be taken inside 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 warranted, you can apply to the court to have the bankruptcy notice set aside or cancelled. This must not be taken lightly though, because if there are inadequate grounds to make an application then you will be under obligation to pay all the creditors legal fees which only inflates 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 avert 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:

  1. The debt claimed on the bankruptcy notice does not exist;
  2. There is a defect in the bankruptcy notice;
  3. You have grounds for a counter-claim, cross demand, or set-off, equal to or exceeding the sum of debt issued in the bankruptcy notice; or
  4. 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 supply evidence that:

  • You have in fact paid the creditor the amount owing under the order or judgement; or
  • You have appealed the order by launching 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 necessary documents with the court that handed down the order. Furthermore, you must have the ability to supply evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.

Further, 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 extend 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 happens when the creditor has failed to abide by the requirements of the Act, in which case you might 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 void as these defects can be fixed at the discretion of the court under s 306( 1) of the Act.

Usually, the defect must be considerable or inflict confusion over the actions you must take to abide by 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 void. The following lists some examples where these vital 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 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 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 cited in a separate document attached to the notice.

The following details some circumstances 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 (presuming 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 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 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 annul a bankruptcy notice, unless the debtor disputes the legitimacy of the notice within 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 need to proficiently demonstrate to the court the following two items:

  1. 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 authenticated and have a realistic possibility of succeeding; and.
  2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor received the judgement on which the bankruptcy notice is based upon. Failure to take advantage of the opportunity to counter-claim, including any unfavourable personal circumstances (like lack of evidence or legal advice), will not be sufficient.

What is an Abuse of process?

An abuse of process results if you can prove that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of a real effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former is true, then you will have the option to set aside the bankruptcy notice due to 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 think I have grounds to act on one of these items above?

If you believe you have a case for one of the abovementioned reasons to challenge your bankruptcy, you will need to get the following documents prepared, filed, and served if you want to apply for your bankruptcy notice to be set aside:.

  1. Application (Form B2); and.
  2. Affidavit.

Application.

You can locate the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either acquire a final order or an interim order.

Final orders must detail the ideal result you want to receive and the legislative basis which the court can approve 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 have to provide a copy of the bankruptcy notice with your application.

However, an interim order needs to describe 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 may be: “The time for compliance with bankruptcy notice (BN00233) be prolonged up to and including 7 days after the outcome of this application by the Court under section 41( 6A) of the Bankruptcy Act 1966.”.

Affidavit.

If you wish to make an application, it must be accompanied by an affidavit which describes the grounds of your application together 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 paramount that your affidavit must adhere to 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 granted.

Filing your application.

Once your documents are completed, 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 circumstances 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 three days after the documents have been lodged.

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 take the documents, the individual serving them may place the document in the presence of the person to be served and verbally tell the person what the documents consist of.

If you are an organisation, you must personally visit a registered office of the organisation and hand the documents to a person servicing that company. You don’t have to present the documents to the organisations principal workplace, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.

If you want 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.

Financial Advice.

If you’re not clear whether you have grounds to set aside the bankruptcy notice, or you’re uncertain whether you should devote the time and money to apply because of financial reasons, speak to Bankruptcy Advice Perth on 1300 879 867 for free advice. As an alternative, you can visit our website for additional details: www.bankruptcy-advice.com.au/perth

 

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