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 quickly to avoid future grief. Owing somebody money regarded here as a creditor, can be any individual or business to whom you owe money. If you’re not able to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will in turn send a bankruptcy notice requesting payment of that money.

Naturally, there is a threshold to the total amount of money owing to creditors before they can get in touch with the AFSA, and the minimum amount is $5,000. Immediately after the creditor has secured a final judgment, AFSA will issue you with a bankruptcy notice.

It’s very important that you take timely 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:

  • – Comply with the bankruptcy notice inside the requested timeframe expressed on the notice (normally 21 days); or
  • – Apply to the courts to request the bankruptcy notice be cancelled or set aside within the timeframe reported 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 simply put, an order that will make you legally bankrupt.

How does a Bankruptcy Notice get served to me?

A bankruptcy notice could be served to you in a number of ways; it could be validly served to you personally, by normal post, or hand delivered to your registered address. In certain situations, a bankruptcy notice can be served electronically, either using email or fax.

If it’s not conceivable for a creditor to serve a bankruptcy notice using any of these sources, a court order can be obtained which permits creditors to serve the bankruptcy notice in a separate 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 specified in the bankruptcy notice; or
  2. Organise an agreement with the creditor, such as a payment plan over a specific period of time. The creditor must accept 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 bankruptcy advice. At this point, you must not delay and get some help. If you have a notice of bankruptcy, just call us here at Fresh Start Solutions Perth on 1300 818 575 for a Free Consultation.

It is very important 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 justified, you can apply to the court to have the bankruptcy notice cancelled or set aside. This mustn’t be taken lightly though, considering that if there are unsatisfactory grounds to make an application then you will be under obligation to pay all the creditors legal costs 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 practical idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. Basically, 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 prove that the debt claimed on your bankruptcy notice does not exist, you will need 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 launching 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 submitted the appropriate documents with the court that handed down the order. Moreover, you must have the ability to present evidence to the Federal Circuit Court that establishes that you have an authentic case for grounds of appeal.

In addition, if you do not start 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 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 arises when the creditor has failed to comply with 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 weighty 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.

Usually, the defect must be significant or inflict confusion over the actions you must take to adhere to the bankruptcy notice for you to have the capability 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 consequently be invalid. The following lists some examples where these critical 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 cited 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 specified in an independent document attached to the notice.

The following describes some scenarios 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 (assuming payment can be reasonably made to this address).

 

There are several other legal requirements that should be noted. 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 in excess of $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 six months of its issue. The only exemption 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 undermine a bankruptcy notice, except if the debtor challenges the validity 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 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 need 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 authenticated and have a reasonable possibility of succeeding; and.
  2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor received the judgement on which the bankruptcy notice is based on. Failure to capitalise on the opportunity to counter-claim, including any damaging personal circumstances (such as lack of evidence or legal advice), will not be sufficient.

What is an Abuse of process?

An abuse of process occurs if you can establish that the reasons behind the bankruptcy notice is to pressure you to pay a debt, rather than a legitimate effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former is true, then you will have the chance to set aside the bankruptcy notice as a result of an abuse of process. To be successful using these grounds, you will need to produce evidence of collateral purpose or unnecessary pressure.

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

If you feel 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 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 must describe the ideal outcome you aspire to receive and the legislative basis which the court can approve this decision. An example of a final order could 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 supply a copy of the bankruptcy notice with your application.

On the contrary, an interim order must 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 may 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 elect to make an application, it must be accompanied by an affidavit which details 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 extremely important that your affidavit must abide by rule 3.02 of the Rules, or else your application may be denied and your request for an extension of time to fulfill the bankruptcy notice may not be approved.

Filing your application.

After your documents are completed, 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 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 lodged.

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 choose not to receive the documents, the person serving them may place the document in the presence of the person to be served and verbally announce to the individual what the documents are.

If you are a company, you must personally go to a registered office of the organisation and hand the documents to a person servicing that business. You don’t have to deliver the documents to the businesses principal business, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s 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 confident whether you have grounds to set aside the bankruptcy notice, or you’re uncertain whether you should devote the time and money to apply due to financial reasons, get in touch with Fresh Start Solutions Perth on 1300 818 575 for free advice. Additionally, you can visit our website for additional information: http://freshstartsolutions.com.au/bankruptcy-perth

 

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