When are costs orders provable debts in a winding up?

Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63.

The Full Court of the Federal Court of Australia has revisited the question of whether costs orders are provable debts in Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63.

The appeal concerned (among other things) the issue of whether certain claims against a company subject to a deed of company arrangement (DOCA) were compromised by the DOCA.

When will a bankruptcy court go behind a judgment?

Grass v Bradley Allen Love Lawyers [2015] FCCA 2422

The recent Federal Circuit Court decision in Grass v Bradley Allen Love Lawyers [2015] FCCA 2422 considered the circumstances in which a court will go behind a judgment and whether a bankruptcy notice should be set aside if the court does go behind the judgment.  

 In this case the applicant, Mr Grass brought an application to set aside a bankruptcy notice that had been served on him by the respondent, being his former solicitors.

A day late, a cent short. How strict is the requirement to comply with a bankruptcy notice?

The Federal Circuit Court of Australia was recently asked to consider whether short payment of the amount claimed in a bankruptcy notice of $0.01 was enough to constitute a failure to comply with the notice. This was in the context of whether a sequestration order ought to be made against the respondent on grounds that she committed an act of bankruptcy by failing to comply with the notice.

Are Costs Orders provable debts?

Beware: costs pursuant to a costs order made after the relevant date

Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63.

While the question of whether a Costs Order is provable in a winding up appears academic, it can have serious ramifications for companies entering administration with a view to executing a Deed of Company Arrangement (DOCA). 

Defending Claims Brought by Bankruptcy Trustees Against Family Members of the Bankrupt

When a person goes bankrupt often their trustee will closely look at the family members to determine if they have received any benefit from the bankrupt prior to the bankruptcy occurring.

Transactions where large amounts have simply been paid to a spouse, a child, a superannuation account or where property has simply been transferred by a bankrupt to a close family member are obviously difficult to defend (and depending on when they are done can be an offence under the bankruptcy act punishable by imprisonment).

Contesting a Court application to make you bankrupt

One of the first considerations should be whether or not it is worthwhile contesting this application. 

If you are unable to pay your debts, in our opinion it is often simply better to go bankrupt and get the 3 years of bankruptcy started.

If, however, there is a serious dispute over the debt in the bankruptcy application or you are able to pay your debts as and when they fall due, then of course such an application should be contested.

Contesting a Bankruptcy Notice

A bankruptcy notice needs to be based on a court judgment or order.  If it’s not then it would be invalid. 

If the bankruptcy notice is based on a default judgment debt and you wish to contest it then you need to immediately seek to have the default judgment set aside in the court in which that judgment was obtained.  You will then need to apply to extend the time for compliance with that bankruptcy notice (in the Federal Circuit Court) pending the outcome of that application to set aside the default judgment. 

Basic Considerations in Putting up a Part 10 Arrangement (Personal Insolvency Agreement)

Sometimes, in order to avoid actually going bankrupt, an individual will consider or attempt to put up a Part 10 proposal to the creditors to resolve all their debt issues in one agreement.

The number of Part 10 proposals that are proposed by an individual and actually accepted by creditors makes up a tiny proportion of the actual bankruptcy appointments each year. They can also be expensive to prepare.

When Should You Consider Bankruptcy?

Nobody ever wants to go bankrupt but it is important to realise that sometimes this is inevitable. 

Often people fight for years to avoid bankruptcy, even when there is no realistic prospect of ever being able to pay off all their creditors.

Such an attitude causes additional stress to the individuals involved as it can mean they spend several years trying to deal with their debt problems and then still have to spend 3 years as a bankrupt, in any event.


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