September 19, 20170

Everything you have to know about Bankruptcy Notices

Posted by:Charles Bosse onSeptember 19, 2017

If you have received a bankruptcy notice or court order you must respond promptly to prevent future grief. Owing someone money regarded here as a creditor, may be any person or organisation to whom you owe money. If you’re unable to pay money to a creditor, the creditor will consult the Australian Financial Security Authority (AFSA) who will consequently send a bankruptcy notice demanding payment of that money.

Historically, there is a threshold to the level of money owing to creditors before they can contact the AFSA, and the minimum amount is $5,000. Immediately after the creditor has obtained a final judgment, AFSA will issue you with a bankruptcy notice.

It’s vital 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:

  • Satisfy the bankruptcy notice within the requested timeframe specified on the notice (normally 21 days); or
  • Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe mentioned on the notice (normally 21 days).

Committing an act of bankruptcy indicates 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 may be served to you in a couple of ways; it can be validly served to you personally, by normal post, or hand delivered to your registered address. In a number of scenarios, a bankruptcy notice can be served digitally, either through fax or email.

If it’s not attainable for a creditor to serve a bankruptcy notice using any of the above means, a court order can be acquired 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 specificed in the bankruptcy notice; or
  2. Organise an agreement with the creditor, for instance a payment plan over a specified period. The creditor must accept 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 recommendations. If you have a notice of bankruptcy, simply call us here at Fresh Start Solutions Gold Coast on 1300 818 575 for a Free Consultation.

It is necessary to note that all of these actions must be taken within the timeframe reported 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 must not be taken lightly though, simply because if there are unsatisfactory grounds to make an application then you will be responsible to pay all the creditors legal costs 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 wise idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you keep away from committing an act of bankruptcy while the court processes your application. In other words, 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 amount 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 validate that the debt claimed on your bankruptcy notice does not exist, you will need 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 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 proper documents with the court that handed down the order. Additionally, you must have the ability to present evidence to the Federal Circuit Court that shows that you have a legitimate case for grounds of appeal.

Additionally, 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 capacity to lengthen 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 emerges when the creditor has failed to fulfill the requirements of the Act, in which case you may have grounds to apply 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 corrected at the discretion of the court under s 306( 1) of the Act

Generally, the defect must be substantial 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 fundamental requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will therefore be void. The following details 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 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 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 stated in a separate document attached to the notice.
  • The following describes some situations where bankruptcy notice defects have not been considerable 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 more 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 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 in less than the timeframe for compliance (s 41( 5)); and.
  • The order or judgment on which the bankruptcy notice is based can not be greater 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:

  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 genuine and have a realistic likelihood of succeeding; and.
  2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor attained 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 (including lack of evidence or legal counsel), will not suffice.

What is an Abuse of process?

An abuse of process manifests if you can establish 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 connection with bankruptcy. If the former holds true, then you will have the option to set aside the bankruptcy notice resulting from an abuse of process. To be successful using these grounds, you will need to provide evidence of collateral purpose or inappropriate pressure.

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

If you feel that you have a case for one of the previously mentioned reasons to challenge your bankruptcy, you will need to get the following documents prepared, filed, and served 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 make an application for a final order or an interim order.

Final orders need to outline the ideal result you wish to receive and the legislative basis which the court can approve this decision. An example of a final order may 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 produce a copy of the bankruptcy notice with your application.

On the contrary, an interim order should 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 might 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 illustrates 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 very important that your affidavit must follow rule 3.02 of the Rules, otherwise your application may be refused and your request for an extension of time to adhere to the bankruptcy notice may not be approved.

Filing your application.

After 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 certain 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 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 choose not to take the documents, the person serving them may place the document in the presence of the individual to be served and verbally announce to the person what the documents consist of.

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

If you would like somebody else to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a fee.

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 because of financial reasons, get in touch with Fresh Start Solutions Gold Coast on 1300 818 575 for free advice. As an alternative, you can visit our website for additional details: http://freshstartsolutions.com.au/bankruptcy-goldcoast

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