When a creditor serves you with a bankruptcy notice, the clock starts. You typically have 21 days from service to pay, negotiate, or apply to the Court to set aside the notice. If you don’t act, you may commit an act of bankruptcy, which lets the creditor take the next step and apply to make you bankrupt.
Avoiding or “going to ground” won’t make it go away. Creditors can ask the Court for substituted service such as by email, text, or post to your last-known address. Trying to avoid service often adds cost and risk and does not stop the process.
At de Jonge Read, we are not insolvency practitioners. Instead, we work alongside business owners and their advisors to explore solutions early such as debt restructuring or cash flow fixes so you don’t end up in a worse position.
How to check bankruptcy status
The official way to check if someone has been bankrupt, or entered into another personal insolvency arrangement, is through AFSA’s Bankruptcy Register Search. This draws from the National Personal Insolvency Index and will show both current and past records. A small search fee applies.
How to check if someone is under bankruptcy?
Similar to the above, you can check through AFSA’s Bankruptcy Register Search by entering a person’s name and date of birth. Results show whether they are currently bankrupt and may also show details of prior arrangements.
For business owners, the real question is not just if someone is bankrupt, but what does it mean for you. If your customer or trading partner is bankrupt, your ability to recover debts will be limited. If you are under financial stress yourself, knowing this information will not fix your own position. That is where early advice and planning are paramount. At de Jonge Read, we focus on practical responses from negotiating repayment options to considering a Small Business Restructure where appropriate.
Set aside bankruptcy notice
If you have been served with a bankruptcy notice, you can apply to the Federal Court or the Federal Circuit and Family Court to set it aside. The timeframe is strict and you must act within 21 days of service.
Grounds can include
- You have applied to set aside or appeal the original judgment debt
- You have a valid counter claim, set off or cross demand
- There is a defect or injustice in how the notice was issued
Often, you will also apply to extend time so you do not commit an act of bankruptcy while the Court decides. If you file to set aside after the 21 days or without valid grounds, you risk adverse costs that add to your debt.
Substituted service: why avoiding notices backfires
Trying to dodge a process server rarely works. If personal service is not practical, creditors can apply to the Court for substituted service, for example sending the notice by email, text, or posting it to your last-known address. Once that order is made, service is legally effective even if you never physically receive the papers.
The bottom line is that avoiding service can accelerate proceedings and reduce your options. It is almost always better to face it and seek advice quickly.
What does a bankruptcy notice really mean?
A bankruptcy notice is not the same as being made bankrupt. It is a formal demand based on a court judgment debt currently $10,000 or more. If you do not comply, that failure is an act of bankruptcy. The creditor can then apply to the Court to make you bankrupt.
If cash flow is the problem, act early
For many small business owners, the issue is not necessarily that debts cannot be paid, it is that cash flow is too tight to pay them on time. There are solutions available before things escalate.
Debtor finance and working capital options can provide quick access to cash tied up in invoices. They do have costs and eligibility requirements, so they are not for everyone. If it is the right fit, we can connect you to trusted providers.
Part X can reduce unsecured debt while the business owner remain in control and continue trading.
Selling or repurposing unused assets can free up cash from non-core assets and relieve pressure. We assist with identifying and facilitating these opportunities.
Creditor and ATO negotiations are more likely to succeed when you engage early with realistic proposals rather than waiting until court action begins.
Key takeaways for Business Owners
Avoiding bankruptcy notices is detrimental. The longer you wait, the fewer options remain.
Substituted service is real. Ignoring a server will not prevent the Court from progressing.
It does not pay to avoid. Ignoring the problem only increases stress, cost and risk.
Take action early. If debt or cash flow is the issue, there are legal and commercial solutions available before bankruptcy becomes inevitable.
Take action now and contact the de Jonge Read team today to discuss the best course of action and protect your client’s financial future.
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
