What is a Bankruptcy Notice?

A Bankruptcy Notice is a formal demand issued by a Creditor (person owed money) against a Debtor (person who owes money) for payment of an amount of money owed as a result of a final court judgment or order.

To issue a Bankruptcy Notice a Creditor must hold a valid final judgment or order that has been made less than 6 years ago and shows that the Debtor owes the Creditor $5,000 or more. The Bankruptcy Notice must include a copy of the final judgment or order upon which the creditor seeks to rely upon to evidence the outstanding debt. Alternatively, it must include multiple orders that evidence a total of $5,000 or more owed by the Debtor to the Creditor

Once a Bankruptcy Notice is issued a Debtor has 21 days from the date they are served to comply with the demand for payment. If this is not complied within this time frame you are deemed to have committed an act of bankruptcy.

I’ve Received a Bankruptcy Notice – What Now?

If you have received a Bankruptcy Notice it is not too late – you have not at this stage been made a bankrupt. However, you need to act quickly and within the 21 day period of the notice. If you fail to act you are risking serious and expensive consequences.

A Debtor who has received a Bankruptcy Notice and does not want to become a bankrupt has the following options under the Bankruptcy Act 1966 (Cth):

  1. Negotiation of private agreements with Creditors;
  2. Debt agreements;
  3. Personal insolvency agreements;
  4. Declaration of intention to present a debtors petition;
  5. Set aside the Bankruptcy Notice / Judgment

The negotiation of private agreements will need to be done quickly but will be on terms mutually acceptable to both the Debtor and Creditor and should be recorded in writing.

Debt agreements are also known as a part 9, and are binding agreements entered between a Debtor and Creditor. This may involve the Debtor paying a sum of money they can afford or pay the debt by installments. These agreements involve a Debtor negotiating to pay a percentage of the combined debt that they can afford over a period of time. A Debtor can make repayments to a debt agreement administrator, rather than individual payments to Creditors. After a Debtor completes the payments and the agreement ends, the Creditors can’t recover the rest of the money owed. Entering a debt agreement may have a serious impact on you as a Debtor, and may affect your ability to get credit and will appear on a public register for a limited time.

A declaration of intention to present a debtors petition provides a Debtor a 21 day protection period where unsecured creditors cannot take further action to recover their debts. This is not recorded on the National Personal Insolvency Index (NPII) and a Debtor is not automatically made bankrupt at the expiry of the 21 days, however if debts aren’t paid during this 21 days, Creditors can still pursue their debts if they are unpaid. Unfortunately, this will not prevent a secured Creditor repossessing goods and the fact a Debtor has lodged a declaration of intention, to apply to the court to make the Debtor bankrupt.

A personal insolvency agreement is also known as a Part 10 and is a legally binding agreement between a Debtor and Creditor. These agreements offer a flexible way to settle debts without becoming a bankrupt. This personal insolvency agreement involves the appointment of a trustee to take control of a Debtors property and make offers to Creditors. These offers could be on a multitude of terms including lump sums or installments.

These agreements have serious consequences and can involve fees and should not be entered into without first seeking financial and legal advice.
If a Debtor believes that a judgment has been unjustly or illegally obtained or has a Defence to any judgment that forms the basis of the Bankruptcy, they can seek to have the Bankruptcy Notice or judgment set aside. To do this a Debtor should seek the advice and assistance of a solicitor.


Following legal and financial advice, if a Debtor still cannot make arrangements or pay their debts they can enter bankruptcy via a ‘debtors petition’. Bankruptcy will last 3 years and 1 days from the date the Debtor provides a trustee in bankruptcy with a statement of affairs. This option is not to be taken lightly. Bankruptcy has serious consequences, particularly if you have assets or are likely to acquire assets during your period of bankruptcy. Your Bankruptcy is recorded National Personal Insolvency Index and must be declared forever. Bankruptcy can also be stressful and expensive, and should be avoided if possible.

If you have received a Bankruptcy Notice in NSW do not hesitate to contact our insolvency team consisting of Cameron Spanner and Kenneth Ti at Adams & Partners Lawyers on 02 4721 6200.

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