Issuing bankruptcy proceedings in order to enforce a judgment of payment
The purpose of issuing Court proceedings is to obtain a judgment or order that the other party has to do something. Often it is in respect to have the other party pay you money.
Unfortunately, even after you obtain a judgment from the Court the other side may fail to pay. Under those circumstances, the law provides certain tools to enable you to “enforce” the judgment. That is, there are a number of ways the law allows you to attempt to obtain payment of the judgment amount from an individual. One of the most aggressive options is issuing bankruptcy proceedings. Alternatives include issuing a warrant to seize and sell property, a summons to attend for oral examination or a garnishee order.
Bankruptcy proceedings can be issued against an individual where the judgment is in excess of $5,000 and the individual is resident or ordinarily resident in Australia. As a matter of course, it is beneficial to undertake asset searches prior to issuing proceedings to ensure that there are assets to satisfy your judgment.
Usually the first step is to issue a Bankruptcy Notice. The Notice is served on the individual and from that date they have 21 days to pay you or make an application to the Court to extend time or set aside the Notice. If they do nothing, then they are taken to have “committed an act of bankruptcy.” It is that act that gives you the right to apply to the Court to have a Trustee appointed over their estate.
Proceedings are issued via a Creditor’s Petition which is ultimately listed before the Court for determination.
The purpose of appointing a Trustee is to realise the assets of the individual for the benefit of all creditors by paying them a dividend. Important restrictions are also placed on the individual and in some cases they may be required to contribute a portion of their income.
Initiating bankruptcy proceedings is a complex process. We recommend you seek legal advice before commencing bankruptcy proceedings.
DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on firstname.lastname@example.org.