This article explores bankruptcy notices, how and when they are issued, and the options available to those issued with a bankruptcy notice.

Bankruptcy Notices Generally

A bankruptcy notice is a formal demand for payment based on a final judgment or order of a Court.

On service of a bankruptcy notice a person owing monies, pursuant to a final judgment or order (the debtor), has 21 days to 'comply'.

To comply with a bankruptcy notice, a debtor must either:

  1. Pay the person or entity owed money pursuant to the relevant final judgment or order (the creditor); or
  2. Make arrangements to the creditor's satisfaction for settlement of the debt.

Failure to comply with a bankruptcy notice means that the debtor has committed an act of bankruptcy1.

In such an event, a creditor may apply to the Court for a sequestration (bankruptcy) order against the debtor2. The creditor may do so by presenting a creditor's petition3.

Issue of a Bankruptcy Notice

Bankruptcy notices are issued by the Australian Financial Complaints Authority (AFSA).

Creditor's may apply to AFSA for the issue of a bankruptcy notice by completing and lodging the prescribed application form (which may be found on AFSA's website) along with a copy of the relevant sealed/certified judgment or order. The creditor must also pay AFSA's fee for issuing the bankruptcy notice.

AFSA will then issue the bankruptcy notice with the sealed/certified judgment or order attached, endorsed and dated by the Official Receiver. The creditor must serve the bankruptcy notice on the debtor within six months after the date of issue, unless extended by AFSA.

Debtor's Options in response to a Bankruptcy Notice

By the end of the 21st day after service of the bankruptcy notice, and to avoid committing an act of bankruptcy, a debtor may:

  1. Pay the amount of the debt or make arrangements to settle the debt to the creditor's satisfaction;
  2. Appeal from, or apply to, the relevant Court to set aside the judgment or order on which the bankruptcy notice relies.

This option provides the debtor with grounds to apply to the Federal Court of Australia or Federal Circuit and Family Court of Australia to:

(a) Extend the time to comply with the bankruptcy notice, pending the outcome of the appeal or set-aside application4; and

(b) Set aside the bankruptcy notice if the judgment or order is successfully appealed or set aside;

  1. Apply to the Court to set aside the bankruptcy notice on the basis that a debtor has a counterclaim, set-off or cross demand. The amount needs to be equal to or greater than the amount of the bankruptcy notice.

Where the debtor has a counterclaim, set-off or cross demand as grounds to set aside the bankruptcy notice, the time for compliance with that bankruptcy notice is automatically extended (without the Court's leave, as is required under other circumstances).5

However, it is required that the counterclaim, set-off or cross demand could not have been set up in the proceeding in with the judgment or order was obtained6. In this respect, a mere lack of awareness of a cause of action, lack of legal advice, or the provision of negligent legal advice, are not sufficient7.

Readers should be aware that the fixed time for compliance is highly important when it comes to applications to set aside or extend time for compliance with a bankruptcy notice.

A Court may only extend time for compliance after the fixed time for compliance if the debtor has, within the fixed time for compliance, either:

  1. Instituted appeal proceedings or applied to the relevant Court to set aside the judgment or order on which the bankruptcy notice relies; or
  2. Applied to set aside the bankruptcy notice.8

A Court does not have the discretion to set aside a validly issued bankruptcy notice after the statutory time limit has expired where there has been an act of bankruptcy.

This can be seen in the case of Di Gregorio v Lumi Financial Pty Ltd9 where an application to set aside a bankruptcy notice was made one day late. The Court found that it was not empowered under the Federal Court Rules10 or the general powers under the Bankruptcy Act11 (the Act) to dispense with the relevant requirements in respect of bankruptcy notices12. As such, the Court could not set aside the bankruptcy notice.

Other Grounds to Set Aside a Bankruptcy Notice

Other than instituting appeal proceedings or pursuing a cross claim, set-off or cross demand, a debtor may apply to set aside a bankruptcy notice on the following grounds:

1. There is a substantive or formal defect in the notice.

A substantive defect is one that fails to meet an essential requirement under the Act that could reasonably mislead a debtor as to what is necessary to comply. A formal defect must be capable of causing substantial injustice for the notice to be set aside. Applications in this respect may include an incorrect name of the creditor (but not a minor error), and an incorrect address of the creditor where the debtor is required to pay the debt (or both);

2. The notice overstates the amount of the debt owed.

A bankruptcy notice will not be invalidated by an overstated amount unless the debtor, within the fixed period for compliance, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the overstatement;13

3. The issue of the bankruptcy notice is an abuse of process.

The onus is on the debtor to establish that the issue of a bankruptcy notice is an abuse of process, and it is a heavy onus.14 Whether an abuse of process has taken place is to be considered at the time the bankruptcy notice is issued, the debtor may not rely on subsequent events. Service of a bankruptcy notice may constitute an abuse of process where, among other things, the creditor is merely attempting to apply pressure on the debtor to pay a debt; where the creditor may not have any intention of commencing bankruptcy proceedings.

4. There is some other reason why the notice should be set aside. For example, where a judgment or order relied upon was suspended, or there was a stay on enforcement, at the time of issue of the notice.15

Should you require assistance with a bankruptcy notice, whether you are a debtor and creditor in such circumstances, please don't hesitate to contact our office.

Given the strict time for compliance with bankruptcy notices and the significant consequences of failing to comply with those timeframes, we highly recommend seeking legal advice as soon as possible should you find yourself in these circumstances.


1 Bankruptcy Act 1966 (Cth) s 40(1)(g).

2 Ibid, s 43(1).

3 Ibid, s 44(4).

4 Ibid, s 41(6A).

5 Ibid, s41(7).

6 Tzovaras v Nufeno Pty Ltd [2003] FCA 1152; Massih v Esber [2008] FCA 1452.

7 Wilson v Arwon Finance Pty Ltd [2021] FCA 1052 at [91].

8 Guss v Johnstone [2000] HCA 26.

9 [2022] FCA 94.

10 2011 (Cth) r 1.32, r 1.34.

11 1966 (Cth) s 30(1).

12 Ibid, s 41(6A).

13 Ibid, s 41(5).

14 Yarranova Pty Ltd v Shaw (No 2) [2014 FCA 616 at [90].

15 Taouk v Lawyers Pty Ltd [2018] FCCA 3390.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.