Bankrupt a debtor who will not pay
We take you from a bankruptcy notice to a sequestration order, and put a trustee in charge of the debtor's estate.Bankrupting somebody is a serious thing to do, and it is worth saying that the point of it is not punishment. It is that a trustee in bankruptcy can reach what a judgment creditor cannot: property held in awkward structures, transfers made to family in the years beforehand, and income above a threshold for the length of the bankruptcy. Before any of that, you have to move through a fixed sequence, and each stage has to be right or the next one does not count. A bankruptcy notice, then an act of bankruptcy, then a creditor’s petition under the Bankruptcy Act 1966 (Cth) (the Act). Debtors facing bankruptcy are advised on exactly where the technical defences sit, so a notice or a petition carrying a defect rarely survives.
An estate worth pursuing
You find out whether a trustee would recover anything before you commit to the process.
A sequence that survives
The notice, the act of bankruptcy and the petition are each done so that the stage after them still counts.
Reach beyond one asset
A trustee takes the whole estate and can unwind transfers the debtor made to put property out of reach.
What does a creditor's petition do that enforcement cannot?
A creditor’s petition asks the court to make a sequestration order, which puts an individual into bankruptcy and hands their divisible property to a trustee. It is available to a creditor owed a provable debt of at least $10,000 who can establish an act of bankruptcy, usually the debtor’s failure to comply with a bankruptcy notice. The difference from ordinary enforcement is scope: a writ reaches one asset at a time, while a trustee takes the whole estate and can unwind transfers made before the bankruptcy. Superannuation, ordinary household goods, tools of trade and a vehicle up to set limits stay with the debtor under the Act.
What is the minimum debt for a creditor's petition?
A provable debt of at least $10,000 under the Act. It has to be a liquidated sum, meaning fixed and certain, such as a judgment debt or an undisputed commercial debt. Below that threshold, bankruptcy is not available and other enforcement routes are the ones to look at.
What is a bankruptcy notice?
A formal demand served on a debtor requiring payment of a judgment debt within 21 days. If they do not pay, do not have the notice set aside, and have no counterclaim that drops the debt below the threshold, they have committed an act of bankruptcy. That act is what grounds the petition, and the notice has to meet strict requirements to produce it.
Can the debtor defend it?
Yes, and many try. They can apply to set the notice aside on grounds such as a disputed debt, a counterclaim or a set-off. At the hearing they can argue the debt is disputed, that they can pay, or that a sequestration order would not serve creditors. We anticipate those arguments when the notice is drafted rather than after they are made.
Will the debtor lose everything?
No. Superannuation, ordinary household property, tools of trade up to a limit and a vehicle up to a set value stay with them. The trustee realises what is left and distributes it to creditors. The trustee also investigates transfers made before the bankruptcy and can recover property that was moved to put it beyond reach.
Does the debtor actually have anything?
A petition only makes sense if there is an estate worth administering. Tell us what you are owed and what you know about the debtor’s property, and we will tell you whether a trustee would realistically recover anything, rather than letting you find that out the expensive way.
You have already won, and it has not made any difference
You hold a judgment against someone who will not pay and who clearly owns things. The garnishees and writs have come back with little or nothing, usually because the assets are held in a way ordinary enforcement cannot touch. What you need is somebody with power over the debtor’s whole position rather than one asset at a time, and the process that gets you there is technical enough that a single defect sends you back to the start.
- We will confirm your debt qualifies for a creditor's petition and assess whether the debtor has an estate worth pursuing.
- We will prepare and serve the bankruptcy notice and manage the timing of the act of bankruptcy.
- We will file the creditor's petition in the correct court and appear at the hearing.
- We will respond to any application to set aside the notice or dismiss the petition.
- We will lodge your proof of debt and stay across the trustee's investigation of pre-bankruptcy transfers.
The judgment is worth less than the paper it is written on
You went to the trouble and expense of getting judgment against an individual. Since then a garnishee caught almost nothing and a writ found nothing worth selling. Meanwhile the debtor still lives in a house, still drives, and still appears to be doing perfectly well. You suspect the property sits in a trust, or in a spouse’s name, or moved there not long before you started. Ordinary enforcement looks at one asset at a time, and whoever structured this made sure each one comes back empty.
What's included in your creditor's petition service
- Eligibility check and an assessment of the debtor's likely estate.
- Bankruptcy notice preparation and service.
- Creditor's petition filing, service and hearing appearance.
- Response to set-aside and dismissal applications.
- Proof of debt lodgement and trustee liaison through the bankruptcy.
What one procedural defect costs
The sequence is unforgiving. A bankruptcy notice carrying a defect can be set aside, which destroys the act of bankruptcy you were relying on. A petition filed in the wrong court is a nullity. A petition served incorrectly hands the debtor a way to have the proceeding dismissed before its merits are considered at all.
Every failed attempt costs what a successful one would have, and it buys the debtor the one thing they actually need, which is time. Property gets transferred, refinanced, or moved into structures that are harder to unwind, and the transfers a trustee could have clawed back start ageing out of reach. By the time a second petition succeeds, the estate the trustee finds is often smaller than the one that was there when you first took advice.
From an unenforceable judgment to a trustee in control
We start with whether it is worth doing at all. That means your debt qualifying as a provable liquidated sum above the threshold, and, more to the point, whether the debtor has an estate a trustee could realise. Sometimes the answer is that bankruptcy would cost you more than it returns, and we will say so before you spend anything.
Where it is worth doing, we prepare the bankruptcy notice to the standard the Act requires, manage service and the timing of the act of bankruptcy, and file the petition in the correct court with the material it needs. If the debtor applies to set the notice aside or opposes the petition, we deal with it. Once the sequestration order is made we lodge your proof of debt and stay across the trustee’s investigation, because the transfers made in the years before bankruptcy are frequently where the recovery actually comes from.
How we manage the petition
Every stage done right, because the next one depends on it.Test the recovery
We confirm the debt qualifies and assess what the debtor actually holds, so you know whether a trustee would recover anything before you spend money.
Notice and petition
We prepare and serve the bankruptcy notice, manage the act of bankruptcy, then file the creditor's petition in the correct court and appear at the hearing.
Work the estate
We lodge your proof of debt and stay across the trustee's realisations and investigation of transfers made before the bankruptcy.
A petition run by a lawyer formally qualified in insolvency
Deciding to bankrupt someone is not a step most creditors take lightly. By the time people get here they have usually tried everything reasonable and been treated as though patience were an invitation. It is a serious thing to do to a person, and the fact that it is often the only thing that works does not make it feel less so.
One of our lawyers holds the ARITA Advanced Certificate in Insolvency and is a member of the Australian Restructuring Insolvency and Turnaround Association. We run creditor’s petitions from the notice through to the sequestration order, and we have acted for trustees afterwards, which is where you learn which estates are worth pursuing and which are not. We will give you that assessment honestly, including when the answer is to stop.
Our great lawyer guarantee
Six principles we hold to, whatever you bring us and however long it takes.
Take the time
We listen carefully to understand what you want to achieve, then step you through the advice and the documents.
Share our knowledge
We pass on as much as we can, so you can make your own informed decisions.
Stick to our knitting
We only do what we are good at, so you never pay for our learning.
Work as one team
Someone is always available to answer your question or point you the right way.
Fair pricing
A fixed or capped quote for advice and documents, so you do not carry the price risk.
It is your show
We are in it for a front row seat to witness your success, not for our egos.
Find out whether bankruptcy would recover anything
Tell us what you are owed and what you know about the debtor’s property. We will tell you whether a trustee would realistically recover anything and whether the petition is worth running, and if it is, we will take it from the notice through to the order.
More on this area of law
Read more about creditor’s petitions, bankruptcy notices and enforcing judgment debts, and how ADLV Law can help.