Bankrupt

What Would You Do If You Received a Bankruptcy Notice?

Background

A bankruptcy notice is essentially a demand for the payment of money by a creditor (a person who is owed money) from a debtor (a person who owes money). They are generally served to enforce a court judgement or judgements worth $5,000 or more against a debtor.

A bankruptcy notice can be served on you by way of post, document exchange (DX), hand, fax, email or other electronic transmission. The Court can also order the bankruptcy notice to be served in another way, if the debtor cannot be reached by any of those ways listed above.

What do I do if I have received a bankruptcy notice?

If you have received a bankruptcy notice, you need to either comply with the bankruptcy notice within 21 days, or apply to the court to have the bankruptcy notice cancelled within the time stated in the actual notice (which is usually 21 days). If you fail to do so, you will commit an ‘act of bankruptcy’. This will in turn allow the creditor to lodge a creditor’s petition to apply for a sequestration order, which will make you bankrupt.

To comply with the bankruptcy notice, you can either pay the amount owed in full or reach an agreement with the creditor (preferably in writing) such as to pay the amount owed in instalments.

Applying to set aside a bankruptcy notice

Alternatively, you can apply to the Federal Court or Federal Circuit Court to set aside the bankruptcy notice or extend the time for compliance with the notice, if you can argue that:

  • There is a defect in the bankruptcy notice, for example, the name on the notice is wrong, there was no time limit for compliance with the notice, the judgement or order was worth less than $5,000 or the notice was not served properly;
  • The debt does not exist, for example, you have already paid for it;
  • You have a claim against the creditor, equal to or greater than the amount claimed in the bankruptcy notice; or
  • The bankruptcy notice is an abuse of process in that it has an improper purpose or is providing unfair pressure on the debtor to pay the debt.

You need to fill out and file Application Form B2, an affidavit and the bankruptcy notice at the Federal Court or Federal Circuit Court. You will need to pay the filing fee on the filing of an application. You must then serve a copy of the application and supporting affidavit that have been stamped by the court on each respondent to the application personally within 3 business days after the application is filed.