September 19, 20170

Everything you need to know about Bankruptcy Notices

Posted by:Charles Bosse onSeptember 19, 2017

If you have acquired a bankruptcy notice or court order you must respond right away to minimise future distress. Owing somebody 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.

As you would expect, there is a limit to the amount of money owing to creditors before they can talk to the AFSA, and the minimum amount is $5,000. Once the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.

It’s imperative that you take timely 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:

  • Abide by 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 in less than the timeframe declared on the notice (normally 21 days).

Committing an act of bankruptcy implies that you give your creditor authorisation to apply to the Federal Circuit Court for a sequestration order, or in simple terms, 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 number of ways; it can be validly served to you directly, by normal post, or hand delivered to your registered address. In special circumstances, a bankruptcy notice could be served digitally, either by means of email or fax.

If it’s not attainable for a creditor to serve a bankruptcy notice using any of the above sources, a court order may be attained which makes it possible for creditors to serve the bankruptcy notice in a separate way.

I have a bankruptcy notice, now what?

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

  1. You must pay in full the amount specified in the bankruptcy notice; or
  2. Set up an agreement with the creditor, such as a payment plan over a defined period. The creditor must agree to the payment arrangements conditions. It’s always recommended that the agreement is made in writing so you have documentation of the agreement.
  3. Get some insolvency advice. At this point, you must not delay and get some recommendations. If you have a notice of bankruptcy, just give us a ring here at Fresh Start Solutions Darwin on 1300 818 575 for a Free Consultation.

It is crucial to note that all of these actions must be taken inside 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 mustn’t be taken lightly though, simply because if there are unsatisfactory grounds to make an application then you will be liable to pay all the creditors legal expenses which only bloats 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 lengthens the timeframe for compliance with the bankruptcy notice, so you evade committing an act of bankruptcy while the court processes your application. Basically, 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 volume 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 prove that the debt claimed on your bankruptcy notice does not exist, you have to present 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 persuasive 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 capacity to produce evidence to the Federal Circuit Court that shows that you have a genuine case for grounds of appeal.

Moreover, if you do not begin 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 lengthen 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 occurs when the creditor has failed to adhere to 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 arduous than others, and not all defects will make a bankruptcy notice void as these defects can be amended at the discretion of the court under s 306( 1) of the Act.

In general, the defect must be serious or lead to confusion over the actions you must take to fulfill the bankruptcy notice for you to have the opportunity 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 therefore be invalid. The following details some examples where these critical 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 specified 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 itemised in a separate document attached to the notice.
  • The following outlines some circumstances where bankruptcy notice defects have not been considerable 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 considered. 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 more than $5,000 when the order or judgements were pronounced;.
  • A bankruptcy notice must be formed 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 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 revoke a bankruptcy notice, except if the debtor disputes the validity 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 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 effectively demonstrate to the court the following two items:

  1. 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 certified 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 acquired the judgement on which the bankruptcy notice is based on. Failure to capitalise on the opportunity to counter-claim, including any negative personal circumstances (like lack of evidence or legal counsel), will not be adequate.

What is an Abuse of process?

An abuse of process results if you can substantiate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of a genuine effort by the creditor to invoke the court’s jurisdiction in connection with insolvency. If the former is true, then you will have the option to set aside the bankruptcy notice because of an abuse of process. To be successful using these grounds, you will need to exhibit evidence of collateral purpose or unnecessary pressure.

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

If you think 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 so as 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 obtain a final order or an interim order.

Final orders have to outline the ideal outcome you want to receive and the legislative basis which the court can grant 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 need to provide a copy of the bankruptcy notice with your application.

Conversely, an interim order should summarise 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.”.

Affidavit.

If you intend to make an application, it must be accompanied by an affidavit which specifies the grounds of your application in conjunction 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 crucial that your affidavit must fulfill rule 3.02 of the Rules, or else your application may be denied and your request for an extension of time to follow the bankruptcy notice may not be approved.

Filing your application.

Once 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 charge that will need to be paid, however in specific circumstances 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 submitted.

If you are an individual, you must personally take the documents to the person identified on the document and give it to them. If they decide not to receive the documents, the person serving them may place the document in the presence of the individual to be served and verbally explain to the individual what the documents entail.

If you are a company, you must personally visit a registered office of the business and present the documents to an individual servicing that business. You don’t have to deliver the documents to the company’s principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that organisations 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 spend the time and money to apply as a result of financial reasons, speak with Fresh Start Solutions Darwin on 1300 818 575 for free advice. Alternatively, you can visit our website for additional information: http://freshstartsolutions.com.au/bankruptcy-darwin

 

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