A creditor bankruptcy notice is a formal demand for payment which is based on a final judgment or order. A creditor bankruptcy notice cannot be issued in relation to an order for the payment of money if more than 6 years has passed since the judgment was given or order was made.
After receiving the creditor bankruptcy notice, the Debtor will have committed an “act of bankruptcy” if the Debtor:
- fails to comply with the bankruptcy notice within 21 days of receiving the creditor bankruptcy notice; or
- fails to apply to the Court to have the Notice set aside within the time stated in the creditor bankruptcy notice.
If the Debtor commits an act of bankruptcy the creditor may file a creditor’s petition with the Federal Circuit Court of Australia seeking an order declaring the Debtor bankrupt. This is called a sequestration order. A creditor’s petition must be lodged within 6 months of the act of bankruptcy. There are many procedural requirements associated with a creditor’s petition. All of the procedural requirements must be satisfied prior to the Court making a sequestration order.
If the creditor’s petition is successful and the Debtor is declared bankrupt, a trustee is appointed to administer the Debtor’s estate. The creditor may choose to specify a particular trustee to be appointed by the Court to manage the bankruptcy (i.e. from a list of registered trustees). If the creditor decides not to specify a trustee then the Australian Financial Security Authority (“AFSA“) will appoint one on behalf of the creditor. AFSA may appoint a registered trustee or the official trustee in bankruptcy.
The Debtor must, within 14 days after being notified of the making of a sequestration order, complete and file with the Official Receiver a Statement of Affairs and provide a copy to the trustee. The purpose of the Statement of Affairs is to assist the trustee with the administration of the bankrupt’s estate by outlining the financial position of the bankrupt, namely the bankrupt’s income, assets and liabilities.
Creditors of the Debtor have a right to inspect and copy the Statement of Affairs. The Statement of Affairs is required to contain a declaration by the Debtor that so far as the Debtor is aware, the particulars provided in it are correct.
All of the property of the bankrupt and any “after-acquired” property (i.e. property acquired during the period of bankruptcy) of the bankrupt vests in his or her trustee pursuant to section 58 of the Bankruptcy Act 1966 (Cth). The trustee will manage the bankruptcy and investigate if they can claim assets to pay creditors. If the Debtor earns an income during the period of bankruptcy which is above the threshold amount, the trustee can require the Debtor to pay contributions from that income. The trustee can use these contributions to help pay the Debtor’s debts.
The bankruptcy period usually ends three years after the filing date of the Statement of Affairs. However, the administration of the estate may continue for some time afterwards.
The Court has a very strict procedural process with respect to creditor’s petitions. If someone owes you more than $5,000 and you want an order declaring that person bankrupt then we can assist you in achieving that result.