Once judgment has been granted in a levy recovery matter the Owners Corporation should seriously consider applying for the issue of a bankruptcy notice.
When is a bankruptcy notice possible?
To obtain a bankruptcy notice in levy recovery matters the judgment debt must be over $5,000 and the lot owner(s) must be individuals (not companies).
Why a bankruptcy notice?
A bankruptcy notice is the first step in being able to commence proceedings to bankrupt someone. After it is served, the debtor has 21 days within which to come to a payment arrangement with the Owners Corporation, pay the amount claimed or to apply to have it set aside. If they do not do any of these things they have committed an act of bankruptcy and the Owners Corporation can file a creditor’s petition seeking a sequestration order (this is the technical name for a bankruptcy order).
A bankruptcy notice is an extremely powerful tool in debt recovery especially when the debt relates to strata levies. The reason being is that the debtor lot owner has something valuable that they want to protect; their apartment. If a sequestration order is made and a trustee appointed to the debtor’s bankrupt estate, one of the first things the trustee will do is to consider whether there are any assets such as a unit that can be sold to pay out creditors.
What happens if the debtor pays down the judgment debt after the act of bankruptcy?
This is one of the most common questions we are asked. Quite simply, if a debt of over $5,000 is owed to the Owners Corporation when the act of bankruptcy is committed (i.e. 21 days after the bankruptcy notice is served) then as long as the debt is liquidated (such as a strata levy) it can be the basis of a creditor’s petition and the bankruptcy proceedings can be initiated.
This is helpful as due to the time between filing a claim for the debt and judgment being awarded often other levies have fallen due and payable. Provided these levies were due and payable before the act of bankruptcy they can be added to any amount outstanding under the judgment debt (including the post judgment interest). Often a debtor will pay down the amount owed under the judgment debt to under the $5,000 mark and not realise that other levies that are due and payable can also be claimed as part of the debt in a creditor’s petition.
For assistance with levy recovery action please contact Kerin Benson Lawyers on these details:
Kerin Benson Lawyers
Email: firstname.lastname@example.org or email@example.com
Date: 22 July 2014