September 18, 20170

Everything you need to know about Bankruptcy Notices

Posted by:Charles Bosse onSeptember 18, 2017

If you have acquired a bankruptcy notice or court order you must take action quickly to minimise future suffering. Owing someone else money referred to here as a creditor, can be any person or company 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 in turn issue a bankruptcy notice requesting payment of that money.

As to be expected, there is a threshold to the level of money owing to creditors before they can talk to the AFSA, and the minimum amount is $5,000. After the creditor has acquired a final judgment, AFSA will issue you with a bankruptcy notice.

It’s essential that you take swift 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:

  • Satisfy the bankruptcy notice within the requested timeframe declared on the notice (normally 21 days); or
  • Apply to the courts to ask for the bankruptcy notice be cancelled or set aside within the timeframe described on the notice (normally 21 days).

Committing an act of bankruptcy signifies that you give your creditor the 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 could be validly served to you in person, by normal post, or hand delivered to your registered address. In several scenarios, a bankruptcy notice could be served in an electronic format, either via fax or email.

If it’s not practical for a creditor to serve a bankruptcy notice using any of these sources, a court order can be acquired which enables creditors to serve the bankruptcy notice in a different way.

I have a bankruptcy notice, now what?

To abide by a bankruptcy notice, you must do one of three things:

  1. You must pay in full the amount indicated in the bankruptcy notice; or
  2. Negotiate an agreement with the creditor, such as a payment plan over a specific period. The creditor must accept the payment arrangements conditions. It’s always suggested that the agreement is made in writing so you have confirmation of the agreement.
  3. Get some bankruptcy advice. At this point, you must not delay and get some recommendations. If you have a notice of bankruptcy, just call us here at Fresh Start Solutions Adelaide on 1300 818 575 for a Free Consultation.

It is essential to note that all of these actions must be taken within the timeframe stated 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 set aside or cancelled. This should not be taken lightly however, because if there are inadequate grounds to make an application then you will be accountable to pay all the creditors legal fees 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 wise idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you steer clear of 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:

  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 must provide 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 genuine argument to do so. You must have already submitted the applicable documents with the court that handed down the order. Additionally, you must have the capacity to produce evidence to the Federal Circuit Court that shows that you have an authentic case for grounds of appeal.

Secondly, 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 emerges when the creditor has failed to fulfill the requirements of the Act, in which case you may have grounds to make an application 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 amended at the discretion of the court under s 306( 1) of the Act.

Normally, the defect must be significant or create 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 important requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be invalid. The following lists some examples where these crucial 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 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 stipulated in a separate document attached to the notice.

The following describes some situations where bankruptcy notice defects have not been substantial 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 (presuming payment can be reasonably made to this address).

There are several other legal requirements that should be kept 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 greater than $5,000 when the order or judgements were pronounced.
  • A bankruptcy notice must be founded on a final judgement or order that is currently 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 disqualify a bankruptcy notice, unless the debtor challenges 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 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 properly demonstrate to the court the following two items:

  1. 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 legitimate 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 secured the judgement on which the bankruptcy notice is based upon. Failure to benefit from the opportunity to counter-claim, including any adversarial personal circumstances (for instance lack of evidence or legal counsel), will not be adequate.

What is an Abuse of process?

An abuse of process manifests if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, as opposed to an honest effort by the creditor to invoke the court’s jurisdiction in connection with bankruptcy. If the former holds true, then you will have the opportunity 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 unjustifiable pressure.

What If I feel that I have grounds to act on one of these items above?

If you find that you have a case for one of the abovementioned reasons to contest 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:.

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

Application.

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

Final orders have to describe the ideal result 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 have to produce a copy of the bankruptcy notice with your application.

On the contrary, an interim order has to illustrate 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 could be: “The time for compliance with bankruptcy notice (BN00233) be extended 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 intend to make an application, it must be accompanied by an affidavit which stipulates 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 satisfy rule 3.02 of the Rules, or else your application may be rejected and your request for an extension of time to fulfill the bankruptcy notice may not be approved.

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 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 filed.

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 decide not to take the documents, the individual serving them may place the document in the presence of the individual 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 hand over the documents to a person servicing that company. You don’t need to give the documents to the organisations principal workplace, 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 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 invest the time and money to apply because of financial reasons, speak with Fresh Start Solutions Adelaide on 1300 818 575 for free advice. Additionally, you can visit our website for additional details: http://freshstartsolutions.com.au/bankruptcy-adelaide

 

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