by Kristine Hopkins, LLM, LLB(Hons), Australian Legal Practitioner
You have received a creditors petition and you have a court date looming – what can you do? I receive phone calls from debtors in this situation very often. Sometimes I can help, other times I can’t. Bankruptcy is a very serious event and the Court will not grant a bankruptcy (sequestration) order in some instances but bankruptcy is a tricky area of law. It is wise to get advice only from an experienced bankruptcy lawyer who can review documents and advise on any loopholes. Loopholes are rare and usually the best and only risk free method to avoid bankruptcy is to negotiate and to pay out the debt in full before the bankruptcy order is made.
If you do not want to engage a lawyer, the most important thing is you will need to ensure you can turn up to Court on the Court date at the correct time so you can explain your case to the Court Registrar. If you cannot turn up on that date then consider writing a letter to the solicitor for the Plaintiff advising them you cannot be there on that date and why and that you will need an adjournment (send a copy of that letter to the Court if you can). If you do not turn up to Court, then the Court will deal with the matter unopposed and will make a bankruptcy (sequestration) order against you in your absence.
Bankruptcy matters are listed at the same time in the Federal Circuit Court (at Melbourne usually 9.30am for first appearances). Make sure you turn up early and speak with the representative solicitor for the Plaintiff. If you can pay the debt, ask them for some time to pay it. If you dispute the debt, tell them that you dispute the debt and why. You may be able to ask the Solicitor whether you can agree to have an adjournment of the matter to another date to allow you some time to pay or write a letter about the disputed debt.
If you cannot agree with the Solicitor for an adjournment, then you will have to stand before the Court and state your position in relation to the debt and your ability to pay it. Court is a public forum and you will have to give good reasons why you have not paid the debt or if you can come up with sufficient money to pay the debt in a short period of time. If the Court is not satisfied that there is any problem with the petition or that you can pay the debt in a short period of time, then it is likely a sequestration order might be made against you.
The next thing to occur after a sequestration order is made will be that you will receive contact from a Trustee in Bankruptcy. Either a private trustee such as firms like Worrells (www.worrells.net.au) or a Government Trustee at AFSA (www.afsa.gov.au). All of your assets (including income) that falls outside the legislative safety net will be available to creditors to pay your debts. If there are not enough assets then there may be no distribution or a distribution of cents in the dollar. The bankruptcy will last for 3 years, after filing your statement of affairs and then it will take about 7 years for the information to fall off your private credit report available to credit reporting agencies.
Whilst the Court may allow one adjournment at the first hearing, the Court will not usually grant any more than one adjournment if there is no good reason for it.
If you have any questions about a creditors petition you have received please contact Kristine Hopkins on 03 9607 8279.