September 19, 20170

Everything you should know about Bankruptcy Notices

Posted by:Charles Bosse onSeptember 19, 2017

If you have received a bankruptcy notice or court order you must respond right away to reduce future grief. Owing anyone money known here as a creditor, could be any individual or business to whom you owe money. If you’re not able to pay money to a creditor, the creditor will consult with the Australian Financial Security Authority (AFSA) who will consequently deliver a bankruptcy notice demanding payment of that money.

Not surprisingly, 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. After the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.

It’s vital that you take prompt 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 inside 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 within the timeframe declared on the notice (normally 21 days).

Committing an act of bankruptcy means 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 variety of ways; it could be validly served to you in person, by regular post, or hand delivered to your registered address. In certain circumstances, a bankruptcy notice may be served in electronic format, either by means of email or fax.

If it’s not practical for a creditor to serve a bankruptcy notice using any of the above sources, a court order can be attained which enables 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:

  1. You must pay in full the amount stipulated in the bankruptcy notice; or
  2. Organise an agreement with the creditor, for example a payment plan over a defined time period. The creditor must agree to the payment arrangements terms and conditions. It’s always advocated that the agreement is made in writing so you have documentation of the agreement.
  3. Get some bankruptcy advice. At this point, you must not delay and get some advice. If you have a notice of bankruptcy, simply give us a ring here at Fresh Start Solutions Hobart on 1300 818 575 for a Free Consultation.

It’s important to note that all of these actions must be taken inside the timeframe specified 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 cancelled or set aside. This must not be taken lightly though, considering that if there are insufficient grounds to make an application then you will be liable to pay all the creditors legal expenses which only expands 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 avoid committing an act of bankruptcy while the court processes your application. To put it simply, 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 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 substantiate that the debt claimed on your bankruptcy notice does not exist, you need to produce 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 an authentic argument to do so. You must have already filed the applicable documents with the court that handed down the order. Further, you must have the capacity to produce evidence to the Federal Circuit Court that illustrates that you have a genuine case for grounds of appeal.

Additionally, if you do not initiate 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 have the ability 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 results when the creditor has failed to fulfill the requirements of the Act, in which case you might have grounds to apply 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 mended at the discretion of the court under s 306( 1) of the Act.

Usually, the defect must be considerable or induce confusion over the actions you must take to follow the bankruptcy notice for you to have the capacity to set aside the bankruptcy notice.

There are some crucial requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be void. The following provides some examples where these important requirements have not been met:

  • The creditor’s address on the bankruptcy notice should 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 outlined 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 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 (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 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 based 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 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 revoke a bankruptcy notice, except if the debtor challenges 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 more 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 need to effectively 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 authentic and have a reasonable chance 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 make use of the opportunity to counter-claim, including any adverse personal circumstances (including lack of evidence or legal advice), will not be adequate.

What is an Abuse of process?

An abuse of process arises if you can validate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of an honest effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former is true, then you will have the opportunity to set aside the bankruptcy notice resulting from an abuse of process. To succeed using these grounds, you will need to deliver evidence of collateral purpose or unwarranted pressure.

What If I think 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 if you want to apply for your bankruptcy notice to be set aside:.

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

Application.

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

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

On the contrary, an interim order must 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 might 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.”.

Affidavit.

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 vital that your affidavit must satisfy rule 3.02 of the Rules, or else your application may be declined and your request for an extension of time to fulfill the bankruptcy notice may not be granted.

Filing your application.

Once your documents are finalised, they will need to be filed with the courts either online or in person at the Federal Circuit Court Registry.

There is a lodging charge that will need to be paid, however in various scenarios 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 three days after the documents have been filed.

If you are an individual, you must personally take the documents to the individual identified on the document and give it to them. If they refuse to receive the documents, the person serving them may put the document in the presence of the person to be served and verbally explain to the individual what the documents consist of.

If you are a business, you must personally go to a registered office of the business and present the documents to a person servicing that company. You don’t have to give the documents to the organisations principal place of business, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that organisations registered addresses.

If you would prefer 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 certain whether you have grounds to set aside the bankruptcy notice, or you’re doubtful whether you should invest the time and money to apply resulting from financial reasons, contact Fresh Start Solutions Hobart on 1300 818 575 for free advice. Alternatively, you can visit our website for more information: http://freshstartsolutions.com.au/bankruptcy-hobart

 

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