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Just been made bankrupt? Here's what to do ...

posted 3rd October 2017
If a bankruptcy order has been made against you by the Federal Circuit Court and a trustee appointed to your bankrupt estate, it’s not necessarily the case that all is lost and you have to remain bankrupt.

In some circumstances, you may be able to have the bankruptcy order set aside, or the bankruptcy annulled by the Court, or the bankruptcy annulled by the trustee, or negotiate a different outcome with your creditors.

Here’s a run-down of the different options.

When will the court set aside a bankruptcy order or annul a bankruptcy?
You can ask the Court to set aside the bankruptcy order or annul your bankruptcy if there was a fundamental error in the bankruptcy process. For example, if:

  • The court documents commencing the bankruptcy proceedings were not served on you properly.
  • You paid the debt claimed by the petitioning creditor shortly before the bankruptcy hearing but the creditor didn’t know about the payment at the time of the bankruptcy hearing so the Court made the order anyway.
  • The petitioning creditor relied on your failure to comply with a bankruptcy notice, but you were never served with the bankruptcy notice.

If the bankruptcy order is set aside or your bankruptcy is annulled, it’s as if the bankruptcy order had never been made. This means you get to keep your assets and your money. You also no longer have to answer to the trustee appointed to your estate and are free to come and go as you please.

How else can you have the bankruptcy annulled?
A bankruptcy can also be annulled when the trustee of your bankrupt estate is satisfied all your debts have been paid in full. The bankruptcy will be automatically annulled from the date the last debt is paid.

If you have a relative, friend or employer who’s willing to give or lend you money so you can pay your debts in full, you can give this money to the trustee so your bankruptcy can be annulled. This will have the same consequences as if the court has set aside the bankruptcy order or annulled your bankruptcy – it’s as if the bankruptcy order was never made.

How do you negotiate a different outcome with your creditors?
If you can’t raise enough cash to pay all your debts in full and have your bankruptcy annulled, you may still be able to negotiate a financial arrangement with your creditors where they’re paid some of their debts (more than they’d receive from the bankruptcy) in exchange for the bankruptcy being annulled. Usually this can be done by a friend, relative or employer helping you give the creditors a lump-sum payment, or by offering to pay creditors additional payments by instalments. If the creditors vote to accept your offer, then your bankruptcy is annulled and it’ll be as if the bankruptcy order was never made.

Get legal advice as quick as you can
If you’ve recently been bankrupted by the Court and believe you’ve got grounds to set aside the bankruptcy order or to ask the Court to annul the bankruptcy, you should get to a lawyer pronto for advice and so the relevant application can be made quickly. Similarly, if you’d like to annul your bankruptcy or to negotiate a different outcome with your creditors, you should see a lawyer before your trustee has begun to sell your assets and incurred costs in administering your bankrupt estate.

You should take to your lawyer whatever records you have in your possession about the order, and be ready to spend time properly instructing your lawyer about the underlying circumstances and debts, your evidence for and against your position, and what you want to achieve (for example, set aside the bankruptcy order, annul your bankruptcy or negotiate a different outcome with your creditors).

A lawyer can’t properly prepare an application, or generally advise you about how best to respond to the bankruptcy order, without all the facts and an understanding of the evidence. For this reason we recommend you don’t scrimp on this step or outsource it to someone without knowledge of the facts or authority to make binding decisions (like a relative or your accountant).

The talented team at Meyer Vandenberg can assist you with any of the issues discussed above, just call…

For more information contact the Commercial Dispute Resolution Team:
Bernice Ellis Partner Commercial Dispute Resolution Team
(02) 6279 4385 Bernice.Ellis@MVLawyers.com.au

Greg Brackenreg Special Counsel Commercial Dispute Resolution Team
(02) 6279 4409 Greg.Brackenreg@MVLawyers.com.au

Courtney Noble Associate Commercial Dispute Resolution Team
(02) 6279 4324 Courtney.Noble@MVLawyers.com.au

 



This material has been prepared for the general information of clients of Meyer Vandenberg Lawyers. Its is not intended to take the place of professional advice and readers should not take action on specific issues in reliance upon any matter of information contained in it.

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