If you owe someone money and you have not paid them even after a court has ordered you to pay them, you may receive a bankruptcy notice. So what do you need to know if you’ve received a bankruptcy notice?
What is a bankruptcy notice?
A bankruptcy notice is a formal demand for payment based on a final judgment or court order. The notice gives you 21 days from the date that it is served on you for you to comply, namely to pay the amount specified in the notice.
When can someone apply for a bankruptcy notice?
If you owe a person at least $10,000 they can make an application for a bankruptcy notice to be issued. However, they can only make the application if they have:
- pursued the money that is owed through legal proceedings; and
- obtained a final judgment or court order in their favour.
What happens if you do not comply with a bankruptcy notice?
If you do not comply with a bankruptcy notice, you commit an act of bankruptcy. The person that served you with the bankruptcy notice can then apply to the court to make you bankrupt. The application is called a creditor’s petition.
When a creditor’s petition has been lodged, the court will set a hearing date and at that hearing the court can make a sequestration order which will make you bankrupt.
Once the sequestration order is made, a trustee in bankruptcy will then be appointed to take control of your assets, sell those assets and then pay the people who you owe money from the proceeds of sale.
What you can do once you’ve been served with a bankruptcy notice?
If you’ve received a bankruptcy notice you may, depending on your circumstances, be able to:
- apply to the court to set aside the bankruptcy notice because of either a defect or irregularity in the bankruptcy notice or because you can prove that you have a counterclaim, set-off or cross claim against the person who is issued you with a bankruptcy notice;
- apply to the court to extend compliance with the notice because you are in the process of setting aside the final judgment or court order in respect of which the bankruptcy notice was issued; or
- negotiate a payment plan with the person you owe money to.
Click here if you want to know more about Insolvency, Bankruptcy and Restructuring.