Question

Jenny has incurred substantial debts from various creditors in funding her lifestyle. One of Jenny’s creditors is Fancy Pants Pty Ltd, who is owed $20,000. The directors of Fancy Pants Pty Ltd want to bankrupt Jenny. Advise Fancy Pants Pty Ltd of the steps they must undertake under the Bankruptcy Act 1966 (Cth) to bankrupt Jenny.

yes it is

Answer 1

Steps they must undertake as per Bankruptcy Act

3.  Steps to be taken before filing a Creditor’s Petition

3.1        An applicant may only present a Creditor’s Petition after a debtor has committed an act of bankruptcy.

3.2 Section 40(1) of the Bankruptcy Act provides for the different 'acts of bankruptcy' that a debtor may commit. The most common act of bankruptcy relied upon by a creditor is a debtor’s non-compliance with a bankruptcy notice that has not been set aside by the Court (see: s 40(1)(g) of the Bankruptcy Act).

Application for a Bankruptcy Notice

3.3        A Bankruptcy Notice is a formal notice requiring a debtor to pay a debt founded on a judgment order. It is the Official Receiver and not the Court which issues a Bankruptcy Notice.

3.4        A creditor may apply to the Official Receiver to issue a Bankruptcy Notice addressed to a debtor if certain requirements under s 41 of the Bankruptcy Act are satisfied. Relevantly, the creditor must have obtained a final judgment or order against the debtor for an amount of at least $5,000, and the execution of that judgment or order must not have been stayed or enforcement suspended. The judgment must be no more than 6 years old.

3.5        A Bankruptcy Notice must be in accordance with the form prescribed by the Bankruptcy Act and Regulations (s 41(2) of the Bankruptcy Act). The prescribed form is Form 1 in Schedule 1 to the Regulations (reg 4.02).

3.6        Further information on how a creditor may apply to the Official Receiver for the issue of a Bankruptcy Notice is available on AFSA’s website.

Service of the Bankruptcy Notice on the debtor

3.7        Once a Bankruptcy Notice has been issued by AFSA, the creditor must serve on the debtor a copy of the Bankruptcy Notice and the final judgment on which the Bankruptcy Notice is founded. The creditor has 6 months to effect service of the Bankruptcy Notice, unless an application is made to AFSA to extend that period (reg 4.02A). The requirements for service, including substituted service, are set out in reg 16.01 of the Regulations, s 309(2) of the Bankruptcy Act, and rule 3.01 of the Bankruptcy Rules. The case law makes it clear that the onus of proving service of a bankruptcy notice lies with a creditor and that the standard of proof is a strict one.

The time for compliance with a Bankruptcy Notice

3.8        A debtor served in Australia has 21 days from the date of service of a Bankruptcy Notice to:

(a) comply with the Bankruptcy Notice or

(b) apply to the Court to set aside the Bankruptcy Notice and/or extend time for compliance with the Bankruptcy Notice.

3.9        In order to ascertain the compliance period of a Bankruptcy Notice, a creditor must correctly identify the date the Bankruptcy Notice was effectively served. Subject to the contrary being proven, the following general principles apply in calculating the date of service:

(a) Where service is effected by hand or by delivery, the 21 day compliance period is usually calculated from the date the document was handed to the debtor or delivered.

(b) Where service is effected by ordinary pre-paid post to the debtor’s last-known address, the 21 day compliance period is usually calculated from the date the document would have been delivered in the ordinary course of post. Relevant considerations include evidence of Australia Post’s delivery timeframes and whether the statutory presumptions in s 160 of the Evidence Act 1995 apply. To establish service in this manner, it will generally be necessary for the creditor to prove by direct evidence on affidavit that:

(i) the Bankruptcy Notice was sent in an envelope that was properly addressed, pre-paid and posted to the debtor’s last-known address and

(ii) the address relied on was in fact the debtor’s last known address.

(c) Where service is effected pursuant to a substituted service order of the Court, the 21 day compliance period is calculated in accordance with the deemed date of service referred to in the order.

(d) Where service is effected electronically, the 21 day compliance period is usually calculated from the time of transmission rather than of actual receipt.

3.10       If a debtor applies to the Court to set aside a Bankruptcy Notice, the Court may make an order extending the time for compliance with the Bankruptcy Notice. If the set aside application relies on certain grounds, such as a set-off, cross demand or cross-claim, there may instead be a deemed extension of time by operation of s 41(7) of the Bankruptcy Act.

Debtor’s failure to comply with a Bankruptcy Notice

3.11       Failure to comply with the Bankruptcy Notice or to apply to the Court to set aside the Bankruptcy Notice within the 21 day compliance period results in the debtor committing an act of bankruptcy.

3.12       Where, on the timely application of the debtor, the Court sets aside the Bankruptcy Notice or determines that the debtor has a counter claim, set off or cross demand which satisfies s 40(1)(g) of the Bankruptcy Act, the debtor will not commit an act of bankruptcy.

3.13       If, however, the Court dismisses a debtor’s set-aside application in circumstances where there was a Court order extending the time for compliance or there was a deemed extension of time, the date of act of bankruptcy will usually be the date of the dismissal.

3.14       Once an act of bankruptcy has been committed by the debtor under s 40(1) of the Bankruptcy Act, the creditor may present a petition. Identifying the correct date of the act of bankruptcy is very important because a Creditor’s Petition cannot be presented before, or more than 6 months after, an act of bankruptcy has been committed. The 6 month time limit cannot be exceeded.

3.15       The requirements and preconditions that a creditor must satisfy before presenting a petition are set out in ss44 and 47 of the Bankruptcy Act.

4.  Preparing the Creditor’s Petition and the affidavit verifying paragraphs 1, 2 and 3 of the creditor’s petition (s 47(1) of the Bankruptcy Act and rule 4.02 of the Bankruptcy Rules)

4.1        The Creditor’s Petition must be filed in accordance with the prescribed form and supported by an affidavit verifying the petition (s 47(1A) of the Bankruptcy Act).

4.2        The prescribed form for a Creditor’s Petition is Form B6 (as required by s 47(1A) of the Bankruptcy Act and rule 4.02 of the Bankruptcy Rules). The petition must be executed by either the applicant or by the applicant’s lawyer.

4.3        Except where the rules or Court orders otherwise provide, all evidence in support of a petition must be given on affidavit. The general formal requirements for affidavits filed in the Federal Court are set out in rules 29.01 to 29.03 of the Court Rules. An affidavit filed in the Federal Court’s bankruptcy jurisdiction should be in accordance with the standard Form 59 for affidavits. Affidavits filed must be modified to include the bankruptcy heading in Form B1, as prescribed by rule 1.07(5) of the Bankruptcy Rules.

4.4        A Creditor’s Petition must be verified by an affidavit of a person who knows the relevant facts (s 47(1) of the Bankruptcy Act). The affidavit may be attached to the Creditor’s Petition, as Part 2 of Form B6, or it may be a separate document (r 4.02 of the Bankruptcy Rules). If it is a separate document, a copy of the Creditor’s Petition must be attached to the affidavit.

4.5        Before presenting the creditor’s petition, the applicant should ensure that it is dated and signed and that the affidavit verifying it does not pre-date the date the petition was executed.

4.6        If the Creditor's Petition is founded on the debtor’s failure to comply with a bankruptcy notice as the act of bankruptcy under s 40(1)(g) of the Bankruptcy Act, care must be taken to correctly identify, in paragraph 4 of the petition in Form B6, the date of service of the bankruptcy notice in order to calculate the date the debtor committed an act of bankruptcy. As to calculating the date of service and reciting the date of the act of bankruptcy in paragraph 4 of the petition, refer to paragraph [3.9] of this information sheet.

4.7        If the Creditor's Petition is founded on an act of bankruptcy other than non-compliance with a Bankruptcy Notice under s 40(1)(g) of the Bankruptcy Act, such as that mentioned in s 40(1)(d) (i.e. issue of execution), further affidavit material is required (rule 4.03 of the Bankruptcy Rules).

5.  Preparing the affidavit of search verifying paragraph 4 of the creditor’s petition – (rule 4.04 of the Bankruptcy Rules)

5.1        Where non-compliance with a bankruptcy notice is relied upon as the basis for a creditor’s petition, the applicant must conduct a search of the records of both the Federal Court of Australia and the Federal Circuit Court of Australia to verify that there is a valid act of bankruptcy to support the petition. A petition cannot be presented before an act of bankruptcy is available.

5.2        Searches can be conducted electronically using Federal Law Search. Federal Law Search is a searchable database of selected information on cases initiated in the Federal Court of Australia and in the federal law jurisdiction of the Federal Circuit Court of Australia.

5.3        The search is by name of the respondent debtor. There is no fee for the search of either Court’s electronic records. The object of the search is to verify the act of bankruptcy referred to in paragraph 4 of the petition and to see if the respondent has filed any application to set aside the bankruptcy notice or any other related application, such as to extend time for compliance with the bankruptcy notice.

5.4        It is noted that if any such application exists, it will appear in the index by reference to the respondent debtor’s name. It will not have the same number as the bankruptcy notice. The Federal Court of Australia or Federal Circuit Court of Australia file number allocated to any application filed by the debtor will not be the bankruptcy notice number allocated by AFSA when it issued the bankruptcy notice.

5.5        It is also critical that the applicant search the full name or names of the debtor accurately, as a misspelling may result in a failure to identify the correct debtor.

5.6        If the respondent has not filed any application, it will be for the person conducting the search to swear or affirm an affidavit deposing to these facts. The form of affidavit states whether any application has been made in respect of the bankruptcy notice. There is no need to be any more specific if no application exists. A copy of the search must be attached to the affidavit of search.

5.7        If the search mentioned above reveals that the respondent debtor has filed material in response to the Bankruptcy Notice, the affidavit should set out what the search revealed, namely the existence of a particular type of application and its outcome. The affidavit must also be accompanied by a copy of the order finally deciding the application (rule 4.04(2)) as well as a copy of the search.

5.8        If an act of bankruptcy - other than failure to comply with a Bankruptcy Notice - is relied upon, the affidavit verifying paragraph 4 of the Creditor’s Petition must set out the facts which establish the particular act of bankruptcy.

6.  How to file the Creditor’s Petition

6.1        An applicant should file the creditor’s petition and accompanying affidavits through the Court’s eLodgment facility. For more information on eLodgment and the Court’s Online Services, refer to [16.1] of this information sheet.

6.2        If a lodged Creditor’s Petition is in the correct form, it will be accepted for filing and processed in eLodgment or manually. The documents will be endorsed by the Court and the application given a hearing date. Through eLodgment, an applicant can access the endorsed versions of the documents, which can be printed or emailed for the purposes of service.

6.3        An applicant must give an endorsed copy of the Creditor’s Petition to the Official Receiver’s Office (AFSA) within two working days of filing (reg 4.05).

Filing fee

6.4        A fee is payable for filing a Creditor’s Petition. Different amounts are payable depending on whether the applicant is a corporation or an individual. The filing fee amounts are available in Fees Payable.

6.5        If an applicant cannot afford this fee, they may be able to ask the Court to exempt them from having to pay it, or to defer the time for its payment. Information and the form to be used to request the Court to either exempt or defer payment can be obtained from the Registry or found in Fees Payable.

Hope the information helped you. Expecting a postive reply from you