September 27, 2017 Comments Closed

Everything you will need to know about Bankruptcy Notices

Posted by:admin onSeptember 27, 2017

If you have received a bankruptcy notice or court order you must take action quickly to avoid future distress. Owing someone money referred to here as a creditor, can be any individual or company to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will phone the Australian Financial Security Authority (AFSA) who will in turn send a bankruptcy notice demanding payment of that money.

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

It’s essential that you take swift 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:

  • Fulfill 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 within the timeframe declared 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 could be served to you in a range of ways; it could be validly served to you directly, by regular post, or hand delivered to your registered address. In certain situations, a bankruptcy notice can be served electronically, either using fax or email.

If it’s not achievable for a creditor to serve a bankruptcy notice using any of these methods, a court order can be provided which allows creditors to serve the bankruptcy notice in a separate way.

I have a bankruptcy notice, now what?

To adhere to a bankruptcy notice, you must do one of three things:

  1. You must pay in full the amount defined in the bankruptcy notice; or
  2. Negotiate an agreement with the creditor, such as a payment plan over a specific timeframe. The creditor must accept the payment arrangements terms. It’s always suggested that the agreement is made in writing so you have evidence of the agreement.
  3. Get some bankruptcy advice. At this point, you must not delay and get some recommendations. If you have a notice of bankruptcy, just reach out to us here at Bankruptcy Experts Ipswich on 1300 795 575 for a Free Consultation.

It is vital to note that all of these actions must be taken within the timeframe stated 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 should never be taken lightly though, since if there are unsatisfactory grounds to make an application then you will be accountable to pay all the creditors legal fees which only escalates the debt you owe to them.

If you do apply for your bankruptcy notice to be set aside, it’s always a good idea to request that the court extends the timeframe for compliance with the bankruptcy notice, so you keep away from committing an act of bankruptcy while the court processes your application. Basically, 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 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 establish that the debt claimed on your bankruptcy notice does not exist, you need to present 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 necessary documents with the court that handed down the order. Moreover, you must have the ability to supply evidence to the Federal Circuit Court that displays that you have a genuine case for grounds of appeal.

Secondly, if you do not start 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 increase the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. For this reason, 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 obey 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 arduous than others, and not all defects will make a bankruptcy notice void as these defects can be repaired at the discretion of the court under s 306( 1) of the Act.

Commonly, the defect must be substantial or lead to 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 necessary requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will consequently be void. The following lists some examples where these crucial 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 detailed 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 detailed in a separate document attached to the notice.

The following describes some situations 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 (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 less than $5,000, provided that the total amount was more 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 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, unless the debtor challenges the credibility 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 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 genuine 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 obtained the judgement on which the bankruptcy notice is based upon. Failure to take advantage of the opportunity to counter-claim, including any damaging personal circumstances (for instance 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, in contrast to 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 because of an abuse of process. To be successful using these grounds, you will need to provide evidence of collateral purpose or unwarranted pressure.

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

If you find that 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 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 illustrate the ideal outcome you aspire to receive and the legislative basis which the court can approve 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 produce a copy of the bankruptcy notice with your application.

On the other hand, an interim order must detail 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 increased 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 states the grounds of your application coupled 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 adhere to rule 3.02 of the Rules, or else your application may be rejected and your request for an extension of time to fulfill the bankruptcy notice may not be granted.

Filing your application.

As soon as 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 some situations 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 individual identified on the document and give it to them. If they choose not to receive the documents, the person serving them may put the document in the presence of the individual to be served and verbally advise the individual what the documents are.

If you are a company, you must personally visit a registered office of the organisation and hand over the documents to a person servicing that company. You don’t need to present the documents to the company’s principal workplace, the Australian Securities and Investment Commission (ASIC) will provide you with a list of that company’s registered addresses.

If you prefer 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 clear whether you have grounds to set aside the bankruptcy notice, or you’re skeptical whether you should spend the time and money to apply as a result of financial reasons, talk to Bankruptcy Experts Ipswich on 1300 795 575 for free advice. Alternatively, you can visit our website for more information: www.bankruptcyexpertsipswich.com.au

 

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