Understanding Bankruptcy Notices in Australia – a guide for Creditors and Debtors
A summary of bankruptcy notices in Australia
A bankruptcy notice is one of the most serious and severe enforcement steps that can be utilised in enforcing a debt against an individual. A bankruptcy notice is the formal commencement of steps to make an individual bankrupt, providing them with a short time-frame tor espond to the creditor’s claim, or risk facing bankruptcy proceedings in the Federal courts of Australia. Bankruptcy notices, and bankruptcy generally, is governed by the Bankruptcy Act 1966 (Cth) and the Bankruptcy Regulations 2021 (Cth).
A bankruptcy notice is a form endorsed by the Official Receiver at the Australian Financial Security Authority (“AFSA”). The Official Receiver is a body within AFSA that operates and governs personal insolvency matters, from operating public bankruptcy and insolvency services, to assisting bankruptcy trustees in discharging their responsibilities. All bankruptcy notices must be formally endorsed by the Official Receiver before becoming valid.
A bankruptcy notice will need to be personally served on the debtor to become effective. This means the bankruptcy notice will need to either be:
- Delivered as a copy to the debtor personally, which would include personal service by a solicitor, process server, or some other mercantile agent;
- sent via a courier service to the debtor at their last known address; or
- left,in an envelope or similar packaging, marked with the debtor’s name and any relevant document exchange (“DX”) number, at a DX where the maintains a DX facility.
How a bankruptcy notice can arise
A bankruptcy notice may be issued by the Official Receiver where a debtor has at least one final judgment or order against them for a total of $10,000 or more. Generally speaking, a bankruptcy notice must be issued only if the judgment remains active (and has not been stayed), and that the judgment was obtained within six years of being given.
Features of a bankruptcy notice
A bankruptcy notice adorns some key details to inform the debtor what is being claimed against them, including:
1. The details of the creditor
This includes the creditors’ name, ABN/ACN (if applicable), address and post code;
2. A breakdown of what is being claimed
The breakdown will include any monetary judgment or order being enforced against you, legal costs claimed by the creditor, interest, or payments already made by the debtor; and
3. Steps to avoid bankruptcy
The bankruptcy notice will disclose that the debtor has twenty one days after service to either pay the debt claimed to the creditor, or make arrangements with the creditor to settle the debt.
4. Where payment can be made
An address for the creditor is to be provided.
5. Extension for compliance
To request more time to comply with a bankruptcy notice, the debtor can apply to the Court within the 21 days of being served. The debtor must show that they have either started proceedings to set aside the judgment or order linked to the bankruptcy notice, or they have applied to the Court to set aside the bankruptcy notice for reasons set out in item 6 below.
6. Apply to set aside the Bankruptcy Notice
To set aside a bankruptcy notice, a debtor must to the Court within 21 days of being served. The debtor must establish that they have a counterclaim, a set-off claim or a cross demand against the creditor that equals or exceeds the amount stated in the notice, and that the debtor couldn't raise this in the original case where the earlier judgment was given.
What to do if you have received a Bankruptcy Notice
If you have received a bankruptcy notice, you should act quickly and avoid delay. Failure to do so can lead to serious consequences, such as a creditors petition being filed against you seeking sequestration orders to make you bankrupt.
It is vital that you obtain legal advice and consider your options carefully. Given the complexity and potential impact, you should promptly seek legal advice from a solicitor to understand your rights, and consider your options carefully.
If you have a claim enforceable against an individual and wish to commence bankruptcy proceedings, or if you have received a bankruptcy notice, do not delay and contact us today by email at info@hfklawyers.com.au or by phone at 02 9307 8900, and we will be happy to assist.
This article is intended as general information only and is not legal advice on any subject matter. By viewing this article,the reader understands there is no solicitor-client relationship between the reader and the HFK Lawyers. The article should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult HFK Lawyers on any legal queries concerning a specific situation.
