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September 26, 2017Comments Closed

Everything you need to know about Bankruptcy Notices

Posted by:Bankruptcy Specialist onSeptember 26, 2017

Bankruptcy Bendigo,Bankrupt Bendigo,Insolvency Bendigo

If you have obtained a bankruptcy notice or court order you must take action promptly to prevent future distress. Owing somebody money referred to here as a creditor, could be any person or company to whom you owe money. If you’re not able to pay money to a creditor, the creditor will reach out to the Australian Financial Security Authority (AFSA) who will in turn send a bankruptcy notice requesting payment of that money.

Historically, there is a threshold to the level of money owing to creditors before they can consult the AFSA, and the minimum amount is $5,000. After the creditor has gotten hold of a final judgment, AFSA will issue you with a bankruptcy notice.

It’s important that you take timely 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:

  • Adhere to the bankruptcy notice in less than the requested timeframe declared 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 reported on the notice (normally 21 days).

Committing an act of bankruptcy means that you give your creditor the authority 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 can be served to you in a range of ways; it may be validly served to you personally, by normal post, or hand delivered to your registered address. In several situations, a bankruptcy notice could be served in an electronic format, either through email or fax.

If it’s not possible for a creditor to serve a bankruptcy notice using any of the above methods, a court order may be obtained which allows creditors to serve the bankruptcy notice in a different way.

I have a bankruptcy notice, now what?

To satisfy 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. Organise an agreement with the creditor, for example a payment plan over a specified timeframe. The creditor must accept the payment arrangements T&C’s. It’s always advocated that the agreement is made in writing so you have confirmation 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 call us here at Bankruptcy Experts Bendigo on 1300 795 575 for a Free Consultation.

It is essential to note that all of these actions must be taken inside 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 set aside or cancelled. This mustn’t be taken lightly however, because 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 prudent idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you evade committing an act of bankruptcy while the court processes your application. In short, 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 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 verify that the debt claimed on your bankruptcy notice does not exist, you have to supply 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 filed the relevant documents with the court that handed down the order. Additionally, you must have the capacity to supply evidence to the Federal Circuit Court that reveals that you have a genuine case for grounds of appeal.

On top of that, 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 that 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 arises when the creditor has failed to adhere to the requirements of the Act, in which case you might have grounds to request the bankruptcy notice to be set aside. Some defects are more serious 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.

In general, the defect must be serious or inflict confusion over the actions you must take to abide by the bankruptcy notice for you to have the ability to set aside the bankruptcy notice.

There are some vital 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 crucial 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 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 outlined 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 a separate document attached to the notice.

The following describes some circumstances where bankruptcy notice defects have not been significant 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 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 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 annul a bankruptcy notice, unless the debtor challenges the credibility of the notice inside the timeframe for compliance (s 41( 5)); and.
  • The order or judgment on which the bankruptcy notice is based can not be greater than six 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 successfully 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 legit and have a reasonable probability 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 make use of the opportunity to counter-claim, including any adverse personal circumstances (like lack of evidence or legal advice), will not be adequate.

What is an Abuse of process?

An abuse of process happens if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of a legitimate effort by the creditor to invoke the court’s jurisdiction in relation to insolvency. If the former is true, then you will have the potential to set aside the bankruptcy notice as a result of an abuse of process. To succeed using these grounds, you will need to produce evidence of collateral purpose or undue pressure.

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

If you believe 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 for you 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 secure a final order or an interim order.

Final orders need to detail the ideal outcome you want to receive and the legislative basis which the court can grant 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 need to produce a copy of the bankruptcy notice with your application.

However, an interim order has to 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 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 want to make an application, it must be accompanied by an affidavit which describes the grounds of your application in conjunction 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 important that your affidavit must follow rule 3.02 of the Rules, or else your application may be rejected and your request for an extension of time to comply with the bankruptcy notice may not be granted.

Filing your application.

Once 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 charge that will need to be paid, however in some scenarios 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 three 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 hand it to them. If they refuse to receive the documents, the person serving them may place the document in the presence of the person to be served and verbally notify the individual what the documents entail.

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

If you want someone else 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 invest the time and money to apply as a result of financial reasons, call Bankruptcy Experts Bendigo on 1300 795 575 for free advice. As an alternative, you can visit our website for additional details: www.bankruptcyexpertsbendigo.com.au

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