A bankruptcy notice is issued under the provisions of the Bankruptcy Act 1966 (Cth). The bankruptcy notice is similar in nature to the statutory demand that can be served on a company that owes a creditor money. Under the terms of a bankruptcy notice, the debtor has 21 days to either:
- Pay the debt to the creditor and settle the account; or
- Enter into a arrangement with the creditor for the repayment of the outstanding amount.
In the event that a bankruptcy notice is not complied with within the 21 days notice period, the creditor is at liberty to file a Creditor’s Petition at the Federal Magistrates Court and commence bankruptcy proceedings against the debtor. Court proceedings will then be listed and the following matters will usually be considered by the Magistrate or Judge:
- The legitimacy of the claim being made against the alleged debtor, including the evidentiary basis of the claim and the situation under which the alleged debt arose;
- The nature of the amount being claimed against the alleged debtor, including the manner in which that amount has been calculated; and
- The ability of the alleged debtor to pay the amounts claimed.
In the event that the Court finds that there has been an “act of bankruptcy” under the Act (Cth) and where certain other evidentiary matters are established, the debtor will usually be declared bankrupt, a trustee in bankruptcy will be appointed, and the bankrupt’s assets and property will be realised so as to pay the creditors’ outstanding loans.
Where you are owed money and are considering issuing a Bankruptcy Notice, you should keep in mind that because of the significant consequences of issuing a bankruptcy notice, other steps should first be taken to investigate whether there are alternative ways of having a debt repaid. This is because it is often the case that a debtor’s debts are far greater than the value of the assets that are subject to realisation. Bankruptcy will offer some protection to a bankrupt against his or her creditors’ claims, while the trustee administers the bankrupt’s estate. Accordingly, entering into a payment scheme (whereby parties agree on an arrangement to have outstanding monies repaid over a period of time) may be a frustrating prospect due to the length of time that passes before full repayment is made, but it may also be a more efficient way to ensure that all moneys are eventually returned.
If you have received a Bankruptcy Notice, you will need to move very quickly and without delay, instruct a Solicitor to review the purported Notice and to see what steps can be taken, without delay, to provide legal advice and/or challenge the Bankruptcy Notice. Other options exist to assist a debtor in managing his or her debts, such as debt agreements and debt consolidation. These alternatives should be explored before any other steps are taken. For more information, see our section on “Credit Defaults & Credit Repair Law”. For more information on the liabilities of parties in bankruptcy proceedings, see our section titled “Rights and Obligations of a Bankrupt.”
Whether you are owed money and wish to issue a Bankruptcy Notice, or whether you are on the receiving end of a Bankruptcy Notice and are facing potential Bankruptcy, Navado Lawyers & Solicitors can help. If you need legal assistance in relation to a Bankruptcy Notice matter, you may wish to make an appointment with one our Bankruptcy & Insolvency Lawyers, who will be able to see you in our Sydney office or in one of our branch offices, listed under the “Locations” tab. We look forward to being of assistance to you.
This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.
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