September 19, 2017 0

Everything you must know about Bankruptcy Notices

Posted by:Charles Bosse onSeptember 19, 2017

Declaring Bankruptcy,Bankruptcy Sydney, Bankruptcy Advice

If you have obtained a bankruptcy notice or court order you must act rather quickly to reduce future distress. Owing someone else money referred to here as a creditor, may be any individual or company to whom you owe money. If you’re unable to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will subsequently deliver 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 consult the AFSA, and the minimum amount is $5,000. Soon after the creditor has attained a final judgment, AFSA will issue you with a bankruptcy notice.

It’s integral that you take swift 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 inside 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 expressed on the notice (normally 21 days).

Committing an act of bankruptcy means that you give your creditor the authorisation to apply to the Federal Circuit Court for a sequestration order, or in other words, 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 individually, by regular post, or hand delivered to your registered address. In a number of scenarios, a bankruptcy notice could be served in an electronic format, either using fax or email.

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

I have a bankruptcy notice, now what?

To fulfill 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 instance a payment plan over a defined period. The creditor must agree to the payment arrangements terms. It’s always advocated that the agreement is made in writing so you have proof of the agreement.
  3. Get some insolvency advice. At this point, you must not delay and get some help. If you have a notice of bankruptcy, simply phone us here at Fresh Start Solutions Sydney on 1300 818 575 for a Free Consultation.

It is essential 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 should not be taken lightly though, given that if there are insufficient grounds to make an application then you will be accountable to pay all the creditors legal expenses 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 clever idea to request that the court extends the timeframe for compliance with the bankruptcy notice, so you evade 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 sum 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 have to deliver 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 submitted the appropriate documents with the court that handed down the order. Further, you must have the capacity to provide evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.

Furthermore, 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 appears when the creditor has failed to obey 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 weighty than others, and not all defects will make a bankruptcy notice invalid as these defects can be remedied at the discretion of the court under s 306( 1) of the Act.

In general, the defect must be significant or result in 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 necessary requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be void. The following details some examples where these critical requirements have not been met:

  • The creditor’s address on the bankruptcy notice needs to 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 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 a separate document attached to the notice.

The following outlines some scenarios where bankruptcy notice defects have not been substantial 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 below $5,000, provided that the total amount was greater than $5,000 when the order or judgements were pronounced;
  • A bankruptcy notice must be based upon 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 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 disputes 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 greater than 6 years old (s 41( 3)( c)).

Under what grounds could I counter-claim, set-off or cross demand?

To succeed 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 genuine and have a reasonable likelihood of succeeding; and.
  2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor secured 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 sufficient.

What is an Abuse of process?

An abuse of process transpires if you can show that the reasons behind the bankruptcy notice is to pressure you to pay a debt, as opposed to a genuine effort by the creditor to invoke the court’s jurisdiction in relation to bankruptcy. If the former is true, then you will have the chance to set aside the bankruptcy notice due to 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 feel 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 contend your bankruptcy, you will need to get the following documents prepared, filed, and served in order to apply for your bankruptcy notice to be set aside:.

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

Application.

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

Final orders need to detail the ideal outcome you wish 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.

On the contrary, an interim order has to 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 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 wish to make an application, it must be accompanied by an affidavit which outlines the grounds of your application along 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 critical that your affidavit must abide by rule 3.02 of the Rules, otherwise your application may be denied and your request for an extension of time to fulfill the bankruptcy notice may not be granted.

Filing your application.

After your documents are finished, 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 fee 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 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 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 refuse to receive the documents, the individual serving them may place the document in the presence of the individual to be served and verbally inform the individual what the documents consist of.

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

If you wish 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 satisfied whether you have grounds to set aside the bankruptcy notice, or you’re hesitant whether you should spend the time and money to apply due to financial reasons, talk to Fresh Start Solutions Sydney on 1300 818 575 for free advice. Additionally, you can visit our website for additional information: http://freshstartsolutions.com.au/bankruptcy-sydney

 

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