Riches To Rags?

Riches To Rags?

The COVID-19 pandemic was undoubtedly the long-awaited catalyst for court procedural innovation, with electronic service becoming the new norm in unprecedented conditions. While the world has emerged from the peak of the crisis and normalcy has somewhat resumed, there remains an uncertain question as to whether these ‘emergency regulations’ will prevail as a standard procedure for the service of official documents. In this article, Litigation and Dispute Resolution Senior Associate Lachlan Boyle and Law Clerk Riley Hickey explore bankruptcy notices and the validity of electronic services.

Bankruptcy Overview

In circumstances where an individual is experiencing financial hardship, they may be entered into bankruptcy voluntarily or involuntarily. Once the individual’s period of bankruptcy commences, they are considered to be ‘bankrupt’ until the time they are discharged from bankruptcy. That discharge typically occurs automatically after the stipulated three-year period, provided there is no objection to the discharge.

During the period of bankruptcy, the bankruptcy is imposed with several restrictions, including:

(a) the bankrupt’s property vesting with a bankruptcy trustee

(b) the bankrupt mandated cooperation with the appointed bankruptcy trustee concerning their affairs

(c) the requirement to obtain consent before international travel; and

(d) the obligation to maintain detailed records of their employment, income, and other related dealings.

For a more comprehensive analysis of bankruptcy generally and options available to bankrupts to annul their bankruptcy, we encourage you to review our previous article, ‘Bargaining your  ’.

Bankruptcy Notice

When a creditor wishes to pursue an outstanding debt, they may apply to the Australia Financial Security Authority to compel the Official Receiver to issue a bankruptcy notice. A bankruptcy notice is considered a formal notice of demand which requires a debtor to:

  1. pay an outstanding debt
  2. enter an agreement for the payment of the debt owed
  3. apply to have the bankruptcy notice set aside.

Given that the bankruptcy notice has such a profound impact on the debtor’s future, the Court closely analyses the manner in which it is served to ensure that it complies with the requirements established by the Bankruptcy Act and its accompanying regulations. However, service has previously been deemed validly affected by way of electronic mail, which could have serious consequences should the debtor neglect to check their inbox.

Ignoring Your Inbox?

Following a series of amendments, the appropriate service of bankruptcy notices has been the source of considerable confusion. Under former regulations, electronic service was considered a valid form of service for bankruptcy notices where the period commenced as soon as the bankruptcy notice landed in your inbox. However, on 1 April 2021, the Bankruptcy Regulations 2021 (Cth) were introduced, which amended former regulations, ultimately clarifying that documents such as bankruptcy notices could be served on a recipient via forms of electronic service, pending the prior consent of the recipient. Naturally, this led to the debtor’s ducking and weaving electronic service in a calculated attempt to avoid liability.

Amongst the maze of ambiguities emerged the recent decision of Pegios v Arambasic [2022], which determined that the bankruptcy notice in question was not properly served on the basis that the defendant did not consent to electronic service.

Following this decision, regulation 102 was promptly amended by the Bankruptcy Amendment (Service of Documents) Regulations 2022 to expressly clarify how electronic service may be affected. Despite being previously led down a garden path, the amendment unequivocally provides that the service of documents in electronic form can validly occur without the need for a party to seek the recipient’s consent beforehand. As such, debtors must beware that the clock begins to tick as soon as the Notice lands in their inbox.

You’ve Received A Bankruptcy Notice – Now What?

Upon receipt of the Official Receivers’ endorsed bankruptcy notice, the creditor may serve the debtor within six months of the date of the notice. Once served with the bankruptcy notice, the debtor must act promptly and without delay, as the 21-day countdown begins as soon as service is validly affected. Should the debtor fail to comply with the bankruptcy notice within this period, the debtor will commit an “act of bankruptcy” pursuant to section 40 of the Bankruptcy Act 1966 (Cth).

Where an act of bankruptcy has been committed, and the creditor is owed at least $10,000,  the creditor may apply via a creditor’s petition for an order that the debtor be made bankrupt.

Suppose you receive a creditor’s petition and you do not dispute the outstanding debt and have otherwise failed to reach with the creditor /s to resolve the outstanding debt. In that case, you may choose to avoid participating in the court proceedings and otherwise agree to be issued with a sequestration order (which marks the commencement of the bankruptcy period).

However, suppose you choose to oppose the creditors’ petition. In that case, you must state the grounds as to why you oppose of the petition, file the relevant documentation, and appear at the hearing. Grounds to oppose the petition may include:

(a) providing evidence that the debtor did not commit the act of bankruptcy

(b) proving that the debtor does not owe the creditor the stipulated outstanding debt

(c) providing evidence that the debtor has the means of satisfying the outstanding debt.

Notably, the individual opposing the bankruptcy must act without delay to ensure all the relevant documents are filed at least three business days before the hearing. Should you require assistance to ensure you comply with the requisite obligations, Ramsden Lawyers can assist you.


Navigating bankruptcy can be a complicated process. If you are concerned about your financial position and are considering your options concerning bankruptcy, or if you have been issued with a bankruptcy notice, we encourage you to seek professional advice to consider your options at the earliest available opportunity.

If you are seeking legal advice, Ramsden Lawyers can assist you. We are happy to arrange an obligation-free initial consultation to assist you in navigating the relevant legislation for your circumstances. Our Litigation and Dispute Resolution Division has specific expertise in assisting individuals to navigate bankruptcy.

The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice.  Specific advice should be sought about your circumstances.