September 19, 20170

Everything you will need to know about Bankruptcy Notices

Posted by:Charles Bosse onSeptember 19, 2017

If you have obtained a bankruptcy notice or court order you must act rather quickly to avoid future suffering. Owing anyone money known here as a creditor, can be any person or organisation 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 in turn dispense a bankruptcy notice demanding payment of that money.

Obviously, there is a threshold to the quantity of money owing to creditors before they can call 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 extremely important that you take prompt 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 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 stated on the notice (normally 21 days).

Committing an act of bankruptcy indicates that you give your creditor the authorisation 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 can be served to you in several ways; it can be validly served to you personally, by normal post, or hand delivered to your registered address. In certain scenarios, a bankruptcy notice could be served in electronic format, either via fax or email.

If it’s not conceivable for a creditor to serve a bankruptcy notice using any of the above means, a court order can be secured 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 detailed in the bankruptcy notice; or
  2. Establish an agreement with the creditor, such as a payment plan over a defined period of time. The creditor must agree to the payment arrangements terms. It’s always advocated 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 advice. If you have a notice of bankruptcy, simply give us a ring here at Fresh Start Solutions Melbourne on 1300 818 575 for a Free Consultation.

It is crucial to note that all of these actions must be taken within the timeframe mentioned 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, given that if there are inadequate grounds to make an application then you will be responsible to pay all the creditors legal costs which only raises the debt you owe to them.

If you do apply for your bankruptcy notice to be set aside, it’s always a practical idea to request that the court extends the timeframe for compliance with the bankruptcy notice, so you stay clear of committing an act of bankruptcy while the court processes your application. Essentially, 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 level 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 demonstrate that the debt claimed on your bankruptcy notice does not exist, you have to 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 persuasive argument to do so. You must have already filed the relevant documents with the court that handed down the order. Along with this, you must have the capacity to supply evidence to the Federal Circuit Court that demonstrates that you have a genuine case for grounds of appeal.

On top of that, 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. 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 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 serious than others, and not all defects will make a bankruptcy notice invalid as these defects can be addressed at the discretion of the court under s 306( 1) of the Act.

In most cases, the defect must be considerable or lead to confusion over the actions you must take to follow the bankruptcy notice for you to have the capability 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 therefore be void. The following provides 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 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 cited 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 describes some scenarios 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 (presuming 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 greater than $5,000 when the order or judgements were pronounced;
  • A bankruptcy notice must be formed 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 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 undermine a bankruptcy notice, unless 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 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 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 probability 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 make use of the opportunity to counter-claim, including any adversarial personal circumstances (including lack of evidence or legal advice), will not suffice.

What is an Abuse of process?

An abuse of process happens if you can show that the reasons behind the bankruptcy notice is to pressure you to pay a debt, rather than 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 option to set aside the bankruptcy notice because of an abuse of process. To be successful using these grounds, you will need to provide evidence of collateral purpose or unjustifiable 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 dispute 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 make an application for a final order or an interim order.

Final orders need to specify 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 supply a copy of the bankruptcy notice with your application.

Moreover, an interim order should illustrate 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 can 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 illustrates 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 crucial that your affidavit must adhere to rule 3.02 of the Rules, or else your application may be denied and your request for an extension of time to comply with the bankruptcy notice may not be granted.

Filing your application.

When 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 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 lodged 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 individual identified on the document and hand it to them. If they decide not to take the documents, the person serving them may put the document in the presence of the individual to be served and verbally inform the person what the documents consist of.

If you are a business, you must personally visit a registered office of the company and present the documents to an individual servicing that business. You don’t have to hand the documents to the businesses principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that businesses 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 cost.

Financial Advice.

If you’re not certain whether you have grounds to set aside the bankruptcy notice, or you’re unconvinced whether you should devote the time and money to apply due to financial reasons, phone Fresh Start Solutions Melbourne on 1300 818 575 for free advice. Additionally, you can visit our website for additional details: http://freshstartsolutions.com.au/bankruptcy-melbourne

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