September 19, 20170

Everything you will need 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 immediately to reduce future suffering. Owing anybody money referred to here as a creditor, can be any individual or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will speak with the Australian Financial Security Authority (AFSA) who will consequently send a bankruptcy notice demanding payment of that money.

As to be expected, there is a limit to the volume of money owing to creditors before they can connect with the AFSA, and the minimum amount is $5,000. Soon after the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.

It’s paramount 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:

  • Fulfill the bankruptcy notice inside the requested timeframe specified 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 pronounced on the notice (normally 21 days).

Committing an act of bankruptcy indicates that you give your creditor permission to apply to the Federal Circuit Court for a sequestration order, or in other words, 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 number of ways; it may be validly served to you personally, by normal post, or hand delivered to your registered address. In some scenarios, a bankruptcy notice could be served electronically, either through email or fax.

If it’s not possible for a creditor to serve a bankruptcy notice using any of the above sources, a court order may be attained which permits creditors to serve the bankruptcy notice in a separate 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 cited in the bankruptcy notice; or
  2. Arrange an agreement with the creditor, for instance a payment plan over a specified timeframe. The creditor must agree to 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 advice. If you have a notice of bankruptcy, just phone us here at Fresh Start Solutions Brisbane on 1300 818 575 for a Free Consultation.

It is necessary to note that all of these actions must be taken within the timeframe cited 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 never be taken lightly however, simply because if there are insufficient grounds to make an application then you will be subject to pay all the creditors legal costs which only increases 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 lengthens the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. In short, 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 volume 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 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 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. Further, you must have the capacity to produce evidence to the Federal Circuit Court that indicates that you have a genuine case for grounds of appeal.

In addition, if you do not begin 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 be able 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 abide by the requirements of the Act, in which case you may 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 repaired at the discretion of the court under s 306( 1) of the Act.

Generally, the defect must be substantial or cause confusion over the actions you must take to fulfill the bankruptcy notice for you to have the ability 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 ultimately be invalid. The following provides some examples where these imperative 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 itemised 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 outlined in a separate document attached to the notice.

The following specifies 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 (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 higher than $5,000 when the order or judgements were pronounced;
  • A bankruptcy notice must be based upon 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 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 invalidate a bankruptcy notice, except if 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 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 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 received the judgement on which the bankruptcy notice is based upon. Failure to benefit from the opportunity to counter-claim, including any adversarial personal circumstances (for example lack of evidence or legal counsel), will not be sufficient.

What is an Abuse of process?

An abuse of process ensues if you can validate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, as opposed to a real effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former is true, then you will have the option to set aside the bankruptcy notice resulting from an abuse of process. To succeed using these grounds, you will need to present evidence of collateral purpose or unwarranted 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 rebut 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 outline the ideal result you aspire 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 supply a copy of the bankruptcy notice with your application.

However, 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 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 describes 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, otherwise your application may be rejected and your request for an extension of time to follow the bankruptcy notice may not be approved.

Filing your application.

As soon as your documents are completed, 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 charge that will need to be paid, however in specific 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 3 days after the documents have been lodged.

If you are an individual, you must personally take the documents to the person identified on the document and give it to them. If they choose not to take the documents, the person serving them may put the document in the presence of the individual to be served and verbally instruct the individual what the documents are.

If you are a business, you must personally visit a registered office of the organisation and give the documents to a person servicing that business. You don’t need to hand over the documents to the organisations principal workplace, the Australian Securities and Investment Commission (ASIC) will supply 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 fee.

Financial Advice.

If you’re not satisfied whether you have grounds to set aside the bankruptcy notice, or you’re unclear whether you should spend the time and money to apply due to financial reasons, speak to Fresh Start Solutions Brisbane on 1300 818 575 for free advice. Alternatively, you can visit our website for more information: https://freshstartsolutions.com.au/bankruptcy-brisbane

 

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