Creditor Bankruptcy Notices: What do I do if I receive one?
By Tiani Kasbarian, a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group
What is a Bankruptcy Notice?
The Bankruptcy Act 1966 (Cth) refers to a bankruptcy notice as a formal warning that is issued to a debtor who owes a creditor a minimum of $10,000 or more. This amount was permanently raised from $5,000 in January 2021.
The Notice requires a debtor to pay an amount within 21 days from the date it has been served. If they do not resolve the debt, the subject of the Notice within that 21 day period, the debtor has committed an ‘act of bankruptcy’, which the applicant creditor may rely upon in order to apply to the court for a sequestration order to be made against the debtor’s estate.
I am a debtor and I have just received a Bankruptcy Notice. What do I do now?
If there is a failure to comply with a creditor’s bankruptcy warning, you are at risk of committing an act of bankruptcy. Once you have been served with a Bankruptcy Notice, in order to resolve the Notice, within 21 days of being served with the Notice you must either:
- pay the amount that is owed (and stated on the Notice) in full to the creditor;
- reach an agreement with the creditor to resolve the debt, such as by proposing an alternative to resolve the debt (by way of payment arrangement, etc.); or
- apply to set aside the Bankruptcy Notice.
As a debtor, you may be eligible to object to a Bankruptcy Notice by seeking to set it aside. This is a formal application to court which must be commenced strictly within 21 days of service of the Bankruptcy Notice. Such action may be commenced if you can establish that the legal requirements for a Bankruptcy Notice have not been met resulting in the Notice being defective (such as the debt amount or details contained in the Notice being incorrect such that it would be difficult to comply with the Notice) or some other defence is available (such as a genuine dispute, or the debt has already been paid, etc.).
Matthews Folbigg Lawyers are specialists in insolvency, including issuing Bankruptcy Notices and commencing or defending bankruptcy proceedings.
If you would like more information or advice in relation to Insolvency, Restructuring or Debt Recovery law, please contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au
