- What is a bankruptcy notice?
A bankruptcy notice is a demand for payment of money by a creditor from a debtor. A creditor is someone who is owed money. A debtor is someone who owes money.
A bankruptcy notice is usually issued because a creditor has obtained a court judgment or judgments worth $5,000.00 or more against a debtor.
- What do I do if I have been served with a bankruptcy notice?
After receiving a bankruptcy notice, you should either:
- comply with the bankruptcy notice within 21 days of receiving it; or
- apply to the court to have the bankruptcy notice cancelled within the time stated in the bankruptcy notice.
If you fail to act in accordance with the above, you will be deemed to have committed an act of bankruptcy, which will give the creditor grounds to lodge a creditor’s petition to apply for a court order that you be made bankrupt (this is called a sequestration order).
- How must a bankruptcy notice be served?
A bankruptcy notice must be served upon the debtor in one of the following ways:
- sending the bankruptcy notice in the post, or by a courier, to your last known address;
- leaving the bankruptcy notice in an envelope at a document exchange (if you have one);
- leaving the bankruptcy notice in an envelope marked with your name, at your last known address;
- personally delivering the bankruptcy notice to you; or
- sending the bankruptcy notice, by fax, email or another type of electronic transmission.
However, if a creditor is unable to serve the bankruptcy notice upon the debtor in accordance with the above, a Court may order that the bankruptcy notice can be served in another way.
- How can I challenge a bankruptcy notice?
A bankruptcy notice may be challenged on any of the following grounds:
Defect in the Bankruptcy Notice
A Court may order that a defective bankruptcy notice fails to meet the requirements of the Bankruptcy Act 1996 (Cth) in so far as:
- the debtors and creditors names in the bankruptcy notice should be the same as names provided in the Court judgment upon which the bankruptcy notice is based;
- the bankruptcy notice must stipulate the address of the creditor, and that address must also be such an address whereby the debtor can attend to payment;
- the bankruptcy notice must stipulate the time limit for compliance with the notice (usually 21 days);
- a copy of the judgment or order upon which the bankruptcy notice is based must be attached to the bankruptcy notice;
- if interest is claimed by the creditor, the calculation of the interest must be detailed in a document attached to the bankruptcy notice; and
- if you have made past payments toward the debt, the total amount claimed on the bankruptcy notice must reflect these amounts paid.
The debt upon which the bankruptcy notice is based does not exist
In order to claim that the debt upon which the bankruptcy notice does not exist, you must:
- have paid the creditor the debt in the judgment or order; or
- have commenced court proceedings to dispute or set aside the judgment or order.
Counter-claim, set-off or cross-demand
You may challenge a bankruptcy notice on the basis of counter-claim or set-off if:
- you have a counter-claim, set-off or cross-demand equal to or greater than the amount claimed in the bankruptcy notice; and
- the counter-claim, set-off or cross-demand could not by law have been pursued in the court proceeding in which the creditor obtained the judgment on which the bankruptcy notice is based.
Abuse of process
If you are able to demonstrate to the Court that the purpose of the bankruptcy notice is to put pressure on you to pay the debt, rather than a genuine effort by the creditor to make you bankrupt then you may be able to get the bankruptcy notice set aside for being an abuse of process.
- What are the requirements for a Bankruptcy Notice?
The requirements of a valid bankruptcy notice are:
- the judgment or order relied upon must be to the sum of at least $5,000.00;
- a bankruptcy notice must be served within 6 months after it is issued unless an extension of time has been granted;
- a bankruptcy notice must be based on a final judgment or order currently payable to the creditor;
- enforcement of the judgment or order must not be suspended (for example by the court allowing payment to be made by instalments); and
- the judgment or order on which the bankruptcy notice is based must not be more than 6 years old at the time the notice is issued.
- How can I set aside a bankruptcy notice?
In order to apply to set aside a bankruptcy notice must:
- file a Form 2 application at the Federal Circuit Court; and
- file an affidavit in support of the application attesting as to the grounds of the application and noting the date the bankruptcy notice was served.
If you have been issued with a bankruptcy notice, or if you are seeking to issue a bankruptcy notice upon a debtor company, please contact Stone Group Lawyers for a complimentary 45 minute initial consultation with one of our litigation specialists.