If a person is owed a specific amount of money (a creditor) over $10,000 by someone (a debtor), the creditor may lodge a Creditor’s Petition to make the debtor bankrupt. If you have been served with a bankruptcy notice, it is vital that you attend to it immediately to protect your wealth before any adverse action is taken against you.
Our lawyers at Chamberlains are here to provide legal assistance should you find yourself in such a situation. Contact us to arrange a free consultation with a member of our team to discuss the options available to you.
- What is a Creditor’s Petition?
- A Creditor’s Petition is a document that a creditor may lodge with the Court to commence sequestration proceedings against the debtor with a view to make the debtor bankrupt.
- If you receive a Creditor’s Petition, it is essential to attend to it urgently. The Court may make a sequestration order in your absence which will immediately declare you bankrupt and have a trustee appointed to manage your affairs.
- Requirements to make a Creditor’s Petition
- The debtor must commit an ‘act of bankruptcy’ for a Creditor’s Petition to b efiled. A Creditor’s Petition is administered by the Bankruptcy Act 1966 (Cth) where the most common act of bankruptcy is the failure by a debtor to respond to a bankruptcy notice.
- Here, the amount of the debt in dispute must be $10,000 or more.
- The Creditor’s Petition and supporting documents must be personally served on the debtor.
- There are specific legal requirements for the proper service of a Creditor’s Petition to be affected, and it is vital to check all the details of a Creditor’s Petition. Should these not be followed correctly, you may have grounds to oppose the Creditor’s Petition.
- End to COVID-19 Temporary Debt Relief Measures
Temporary debt relief measures were implemented on 25 March 2020 due to the outbreak of the COVID-19 pandemic; however, the measures have ended as of 1 January 2021.
- The minimum debt threshold requirement for creditors to apply for a bankruptcy notice against a debtor is $10,000, which is reduced from $20,000.
- A debtor, who receives a bankruptcy notice, has 21 days to respond to it, which is reduced from 6 months.
- What happens if I receive a Creditor’s Petition?
- You will receive a hearing date, time and place to attend before a Registrar or Judge at the Court.
- Bankruptcy can last from a minimum of 3 years up to 8 years. After three years, the debtor is discharged from bankruptcy; however, there will be a permanent record of the debtor’s bankruptcy available on the National Personal Insolvency Index database.
- Upon the entering of a sequestration order, a bankruptcy trustee(s) is appointed to administer your affairs, including your assets as they see fit.
- This may affect your ability to receive financial assistance such as loans in future.
- What are my options?
If you have received a Creditor’s Petition, you may:
- Pay the debt
- You can agree to pay the claimed amount to the creditor before the hearing, thereby asking the Court to discontinue the Creditor’s Petition.
- Negotiate payment or settle the amount
- You may negotiate and make arrangements with the creditor to pay the amount in instalments or settle the amount with the creditor and either adjourn or discontinue the sequestration proceedings.
- Oppose the Creditor’s Petition
- You may arrange for someone to represent you in Court and oppose the Creditor’s Petition. This may be on grounds such as:
- not having committed the act of bankruptcy;
- never having received a bankruptcy notice;
- having already paid the debt;
- having made prior arrangements with the creditor;
- not owing the creditor the claimed amount; and
- being solvent.
If the debtor’s opposition to the Creditor’s Petition is successful, the petition may be dismissed by the Court.
- Agree to a sequestration order
- Your assets will be divided amongst the creditors by an external trustee. Income or assets like the family home may be sold to pay the debts.
- Apply for an adjournment
- You may apply to adjourn the petition if you require more time to sort out your options before the hearing date.
**Assisted by: Neil Bookseller & Isabelle Lee**
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