Everything you should know about Bankruptcy Notices

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Everything you should know about Bankruptcy Notices

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If you have received a bankruptcy notice or court order you must act rather quickly to avoid future grief. Owing anyone money regarded here as a creditor, can be any individual or business to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will call the Australian Financial Security Authority (AFSA) who will consequently issue a bankruptcy notice demanding payment of that money.

Clearly, there is a threshold to the quantity of money owing to creditors before they can connect with the AFSA, and the minimum amount is $5,000. When the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.

It’s imperative 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:

  • Adhere to the bankruptcy notice inside the requested timeframe reported on the notice (normally 21 days); or
  • Apply to the courts to ask for the bankruptcy notice be cancelled or set aside in less than the timeframe described on the notice (normally 21 days).

Committing an act of bankruptcy means that you give your creditor 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 several ways; it may be validly served to you individually, by normal post, or hand delivered to your registered address. In some circumstances, a bankruptcy notice may be served in a digital form, either through email or fax.

If it’s not feasible for a creditor to serve a bankruptcy notice using any of the above methods, a court order may be obtained which makes it possible for 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 listed in the bankruptcy notice; or
  2. Set up an agreement with the creditor, such as a payment plan over a specific period of time. The creditor must accept the payment arrangements terms. It’s always recommended 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 guidance. If you have a notice of bankruptcy, just give us a ring here at Bankruptcy Experts Wangaratta on 1300 795 575 for a Free Consultation.

It’s important to note that all of these actions must be taken inside the timeframe laid out 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 not be taken lightly however, because if there are unsatisfactory grounds to make an application then you will be responsible to pay all the creditors legal expenses 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 good 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. 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 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 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 a convincing argument to do so. You must have already filed 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 establishes that you have a legitimate case for grounds of appeal.

Secondly, if you do not initiate 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 lengthen 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 occurs when the creditor has failed to fulfill 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 severe than others, and not all defects will make a bankruptcy notice invalid as these defects can be amended at the discretion of the court under s 306( 1) of the Act.

In most cases, the defect must be considerable 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 critical 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 important 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 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 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 outlined in an independent document attached to the notice.

The following outlines some cases where bankruptcy notice defects have not been considerable 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 less than $5,000, provided that the total amount was higher than $5,000 when the order or judgements were pronounced;
  • A bankruptcy notice must be formed on 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 exemption 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 disqualify a bankruptcy notice, except if the debtor disputes the validity 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 succeed using the grounds of counter-claim, set-off or cross demand, you will have 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 likelihood of succeeding; and.
  2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor acquired the judgement on which the bankruptcy notice is based on. Failure to capitalise on the opportunity to counter-claim, including any detrimental personal circumstances (like lack of evidence or legal counsel), will not suffice.

What is an Abuse of process?

An abuse of process transpires if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, rather than an honest 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 succeed using these grounds, you will need to provide evidence of collateral purpose or inappropriate 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 get 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 need to 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 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 have to present a copy of the bankruptcy notice with your application.

Conversely, an interim order must illustrate 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 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 want to make an application, it must be accompanied by an affidavit which outlines 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 paramount that your affidavit must comply with rule 3.02 of the Rules, otherwise your application may be rejected and your request for an extension of time to abide by the bankruptcy notice may not be granted.

Filing your application.

After your documents are finalised, they will need to be filed with the courts either online or personally at the Federal Circuit Court Registry.

There is a lodging fee that will need to be paid, however in certain situations 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 submitted.

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 person serving them may put the document in the presence of the person to be served and verbally inform the individual what the documents entail.

If you are a company, you must personally go to a registered office of the organisation and deliver the documents to a person servicing that business. You don’t need to give the documents to the businesses principal workplace, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that organisations 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 hesitant whether you should spend the time and money to apply because of financial reasons, phone Bankruptcy Experts Wangaratta on 1300 795 575 for free advice. Alternatively, you can visit our website for additional details: www.bankruptcyexpertswangaratta.com.au

 

By | 2018-07-26T02:43:12+00:00 September 26th, 2017|Uncategorized|0 Comments

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