What is a bankruptcy notice?

A bankruptcy notice is a formal document issued by the Australian Financial Security Authority (the Official Receiver) on the application of a creditor who has obtained a judgment debt of at least $5,000.00 against a debtor (the person who receives this notice).

What should I do after I receive a bankruptcy notice?

 You should within 21 days of service[1] of the Bankruptcy Notice:

(a)   pay the debt in full;

(b)   make arrangements to the creditor’s satisfaction for settlement of the debt; or

(c)   apply to set-aside the Bankruptcy Notice and/or extend time for compliance.[2]

Deciding whether to apply to set aside a Bankruptcy Notice and/or extend time for compliance will involve consideration of the judgment debt and an assessment of whether the technical requirements to issue a Bankruptcy Notice have been complied with among other considerations. Thus, it is highly advisable to seek specialist legal advice on these matters.

What happens if I don’t deal with the Bankruptcy Notice within the prescribed time period?

You will have committed an ‘act of bankruptcy’ and this could be used against you to obtain a court order to declare you bankrupt. If granted, the order will, among other things, see a trustee seize your assets including houses and land[3] to pay your debts and their fees in administering your bankrupt estate.

While these court proceedings, known as a creditor’s petition, can still be opposed at this stage this is oftentimes an expensive exercise.

The above summary is meant only as a general overview of bankruptcy notices. The prudent course of action upon receiving a bankruptcy notice is to immediately seek legal advice. For more information on bankruptcy matters please contact Shavin Silva at Pace Lawyers on (08) 8410 9294 or email him directly at s.silva@pacelawyers.com.

 


[1] This length of time may vary depending on your personal circumstances.

[2] This is not an exhaustive list, you may have other options depending on your circumstances.

[3] There are a few restrictions on the assets a trustee in bankruptcy can claim as part of the bankrupt estate.