Bankruptcy Information Sheet 1

Presenting a Creditor’s Petition

About this information sheet

This information sheet sets out general information on how to apply to the Court for a sequestration order that makes someone a bankrupt. Proceedings to make someone a bankrupt are commenced by filing (or presenting) a creditor’s petition in the Federal Court of Australia. This information sheet deals only with petitions that rely upon a debtor’s failure to comply with a bankruptcy notice as the act of bankruptcy.

This information sheet should be read in conjunction with the following general information:

• Bankruptcy Information Sheet 2: Creditor's Petition Checklist
• Bankruptcy Information Sheet 3: Opposing a Creditor's Petition
• Bankruptcy Information Sheet 4: Setting aside a Bankruptcy Notice
• Bankruptcy Information Sheet 5: Substituted Service Applications
• Bankruptcy Information Sheet 6: Consequences of a Sequestration Order

It is important to note the following information:

• This information sheet is published as part of a series of information sheets and practical guides and contains links to the most commonly used forms approved or prescribed by the relevant legislation or court rules.
• This information sheet contains general information only and is not a substitute for the Bankruptcy Act 1966 or the Bankruptcy Rules 2016. To the extent that there is any inconsistency or discrepancy, the Bankruptcy Act and Bankruptcy Rules as interpreted by the Courts prevail. Links to the legislation and court rules are set out below.
• While Registry staff can provide practical assistance to litigants they cannot provide legal advice or assist with the content of any document. The onus is on the party presenting the petition to undertake their own enquiries and assessment of the legal issues.

References and links to legislation, court rules and approved forms:

• Bankruptcy Act 1966 (the Bankruptcy Act)
• Federal Court (Bankruptcy) Rules 2016 (the Bankruptcy Rules)
• Bankruptcy Regulations 2021 (the Regulations)
• Federal Court of Australia Act 1976 (the Court Act)
• Federal Court Rules 2011 (the Court Rules)
• Prescribed forms under the Regulations
• Approved forms under the Bankruptcy Rules

1. Nature of application

1.1 Proceedings to make someone a bankrupt are commenced by filing with the Court an application called a creditor’s petition (using Form B6 of the Bankruptcy Rules). By filing a petition, sometimes referred to as presenting a petition, a creditor is applying to the Court for an order that the estate of a debtor be sequestrated, making that debtor a bankrupt (see: s 43(2) of the Bankruptcy Act). In such proceedings, the creditor is referred to as the ‘applicant’ and the debtor as the ‘respondent’.

2. Prior to filing a creditor’s petition

2.1 Before presenting a creditor’s petition, the applicant creditor may consider conducting a search of the National Personal Insolvency Index (NPII) to ensure the debtor is not already a bankrupt. The NPII is a public record of personal insolvency proceedings and administrations in Australia (including a record of bankruptcies, accepted debt agreements, and Part X arrangements) maintained by the Official Receiver under the Bankruptcy Act. There is a fee for a NPII search. More Information on the NPII is available online at the Australian Financial Security Authority (AFSA) website.

2.2If the debtor is already a bankrupt, the applicant creditor’s debt may be provable in that bankruptcy. If that is the case, the debt cannot be made the basis of a separate creditor’s petition. Different considerations apply where a creditor’s debt is not provable in an existing bankruptcy (see s 59 of the Bankruptcy Act).

3. Steps to be taken before filing a creditor’s petition

3.1 An applicant may only present a creditor’s petition after a debtor has committed an act of bankruptcy.

3.2 Section 40(1) of the Bankruptcy Act provides for the different ‘acts of bankruptcy’ that a debtor may commit. The most common act of bankruptcy relied upon by a creditor is a debtor’s non-compliance with a bankruptcy notice that has not been set aside by the Court (see: s 40(1)(g) of the Bankruptcy Act).

Application for a bankruptcy notice

3.3 A bankruptcy notice is a formal notice requiring a debtor to pay a debt founded on a judgment order. It is the Official Receiver and not the Court which issues a bankruptcy notice.

3.4 A creditor may apply to the Official Receiver to issue a bankruptcy notice addressed to a debtor if certain requirements under s 41 of the Bankruptcy Act are satisfied. Relevantly, the creditor must have obtained a final judgment or order against the debtor for an amount of at least $10,000, and the execution of that judgment or order must not have been stayed or enforcement suspended. The judgment must be no more than 6 years old.

3.5 A bankruptcy notice must be in accordance with the form prescribed by the Bankruptcy Act and Regulations (s 41(2) of the Bankruptcy Act). The prescribed form is Form 1 in Schedule 1 to the Regulations (reg 9).

3.6 Further information on how a creditor may apply to the Official Receiver for the issue of a bankruptcy notice is available on AFSA’s website.

Service of the bankruptcy notice on the debtor

3.7 Once a bankruptcy notice has been issued by AFSA, the creditor must serve on the debtor a copy of the bankruptcy notice and the final judgment on which the bankruptcy notice is founded. The creditor has 6 months to effect service of the bankruptcy notice, unless an application is made to AFSA to extend that period (reg 10). The requirements for service, including substituted service, are set out in reg 102 of the Regulations, s 309(2) of the Bankruptcy Act, and rule 3.01 of the Bankruptcy Rules. The case law makes it clear that the onus of proving service of a bankruptcy notice lies with a creditor and that the standard of proof is a strict one.

The time for compliance with a bankruptcy notice

3.8 A debtor served in Australia has 21 days from the date of service of a bankruptcy notice to:

(a) comply with the bankruptcy notice or

(b) apply to the Court to set aside the bankruptcy notice and/or extend time for compliance with the bankruptcy notice.

3.9 In order to ascertain the compliance period of a bankruptcy notice, a creditor must correctly identify the date the bankruptcy notice was effectively served. Subject to the contrary being proven, the following general principles apply in calculating the date of service:

(a) Where service is effected by hand or by delivery, the 21 day compliance period is usually calculated from the date the document was handed to the debtor or delivered.

(b) Where service is effected by ordinary pre-paid post to the debtor’s last-known address, the 21 day compliance period is usually calculated from the date the document would have been delivered in the ordinary course of post. Relevant considerations include evidence of Australia Post’s delivery timeframes and whether the statutory presumptions in s 160 of the Evidence Act 1995 apply. To establish service in this manner, it will generally be necessary for the creditor to prove by direct evidence on affidavit that:

(i) the bankruptcy notice was sent in an envelope that was properly addressed, pre-paid and posted to the debtor’s last-known address; and

(ii) the address relied on was in fact the debtor’s last known address.

(c) Where service is effected pursuant to a substituted service order of the Court, the 21 day compliance period is calculated in accordance with the deemed date of service referred to in the order.

3.10 If a debtor applies to the Court to set aside a bankruptcy notice, the Court may make an order extending the time for compliance with the bankruptcy notice. If the set aside application relies on certain grounds, such as a set-off, cross demand or cross-claim, there may instead be a deemed extension of time by operation of s 41(7) of the Bankruptcy Act.

Debtor’s failure to comply with a bankruptcy notice

3.11 Failure to comply with the bankruptcy notice or to apply to the Court to set aside the bankruptcy notice within the 21 day compliance period results in the debtor committing an act of bankruptcy.

3.12 Where, on the timely application of the debtor, the Court sets aside the bankruptcy notice or determines that the debtor has a counter claim, set off or cross demand which satisfies s 40(1)(g) of the Bankruptcy Act, the debtor will not commit an act of bankruptcy.

3.13 If, however, the Court dismisses a debtor’s set-aside application in circumstances where there was a court order extending the time for compliance or there was a deemed extension of time, the date of act of bankruptcy will usually be the date of the dismissal.

3.14 Once an act of bankruptcy has been committed by the debtor under s 40(1) of the Bankruptcy Act, the creditor may present a petition. Identifying the correct date of the act of bankruptcy is very important because a creditor’s petition cannot be presented before, or more than 6 months after, an act of bankruptcy has been committed. The 6 month time limit cannot be exceeded.

3.15 The requirements and preconditions that a creditor must satisfy before presenting a petition are set out in ss 44 and 47 of the Bankruptcy Act.

4. Preparing the creditor’s petition and the affidavit verifying paragraphs 1, 2 and 3 of the creditor’s petition (s 47(1) of the Bankruptcy Act and rule 4.02 of the Bankruptcy Rules)

4.1 The creditor’s petition must be filed in accordance with the prescribed form and supported by an affidavit verifying the petition (s 47(1A) of the Bankruptcy Act).

4.2 The prescribed form for a creditor’s petition is Form B6 (as required by s 47(1A) of the Bankruptcy Act and rule 4.02 of the Bankruptcy Rules). The petition must be executed by either the applicant or by the applicant’s lawyer.

4.3 Except where the rules or court orders otherwise provide, all evidence in support of a petition must be given on affidavit. The general formal requirements for affidavits filed in the Federal Court are set out in rules 29.01 to 29.03 of the Court Rules. An affidavit filed in the Federal Court’s bankruptcy jurisdiction should be in accordance with the standard Form 59 for affidavits. Affidavits filed must be modified to include the bankruptcy heading in Form B1, as prescribed by rule 1.07(5) of the Bankruptcy Rules.

4.4 A creditor’s petition must be verified by an affidavit of a person who knows the relevant facts (s 47(1) of the Bankruptcy Act). The affidavit may be attached to the creditor’s petition, as Part 2 of Form B6, or it may be a separate document (r 4.02 of the Bankruptcy Rules). If it is a separate document, a copy of the creditor’s petition must be attached to the affidavit.

4.5 Before presenting the creditor’s petition, the applicant should ensure that it is dated and signed and that the affidavit verifying it does not pre-date the date the petition was executed.

4.6 If the creditor’s petition is founded on the debtor’s failure to comply with a bankruptcy notice as the act of bankruptcy under s 40(1)(g) of the Bankruptcy Act, care must be taken to correctly identify, in paragraph 4 of the petition in Form B6, the date of service of the bankruptcy notice in order to calculate the date the debtor committed an act of bankruptcy. As to calculating the date of service and reciting the date of the act of bankruptcy in paragraph 4 of the petition, refer to paragraph [3.9] of this Information Sheet.

4.7 If the creditor’s petition is founded on an act of bankruptcy other than non-compliance with a bankruptcy notice under s 40(1)(g) of the Bankruptcy Act, such as that mentioned in s 40(1)(d) (i.e. issue of execution), further affidavit material is required (rule 4.03 of the Bankruptcy Rules).

5. Preparing the affidavit of search verifying paragraph 4 of the creditor’s petition – (rules 4.04 of the Bankruptcy Rules)

5.1 Where non-compliance with a bankruptcy notice is relied upon as the basis for a creditor’s petition, the applicant must conduct a search of the records of both the Federal Court of Australia and the Federal Circuit and Family Court of Australia (FCFCOA) to verify that there is a valid act of bankruptcy to support the petition. A petition cannot be presented before an act of bankruptcy is available.

5.2 Searches can be conducted electronically using Federal Law Search. Federal Law Search is a searchable database of selected information on cases initiated in the Federal Court of Australia and in the general federal law jurisdiction of the FCFCOA.

5.3 The search is by name of the respondent debtor. There is no fee for the search of either Court’s electronic records. The object of the search is to verify the act of bankruptcy referred to in paragraph 4 of the petition and to see if the respondent has filed any application to set aside the bankruptcy notice or any other related application, such as to extend time for compliance with the bankruptcy notice.

5.4 It is noted that if any such application exists, it will appear in the index by reference to the respondent debtor’s name. It will not have the same number as the bankruptcy notice. The Federal Court or FCFCOA file number allocated to any application filed by the debtor will not be the bankruptcy notice number allocated by AFSA when it issued the bankruptcy notice.

5.5 It is also critical that the applicant search the full name or names of the debtor accurately, as a misspelling may result in a failure to identify the correct debtor.

5.6 If the respondent has not filed any application, it will be for the person conducting the search to swear or affirm an affidavit deposing to these facts. The form of affidavit states whether any application has been made in respect of the bankruptcy notice. There is no need to be any more specific if no application exists. A copy of the search must be attached to the affidavit of search.

5.7 If the search mentioned above reveals that the respondent debtor has filed material in response to the bankruptcy notice, the affidavit should set out what the search revealed, namely the existence of a particular type of application and its outcome. The affidavit must also be accompanied by a copy of the order finally deciding the application (rule 4.04(2)) as well as a copy of the search.

5.8 If an act of bankruptcy - other than failure to comply with a bankruptcy notice - is relied upon, the affidavit verifying paragraph 4 of the creditor’s petition must set out the facts which establish the particular act of bankruptcy.

6. How to file the creditor’s petition

6.1 An applicant should file the creditor’s petition and accompanying affidavits through the Court’s eLodgment facility. For more information on eLodgment and the Court’s Online Services, refer to [16.1] of this information sheet.

6.2 If a lodged creditor’s petition is in the correct form, it will be accepted for filing and processed in eLodgment or manually. The documents will be endorsed by the Court and the application given a hearing date. Through eLodgment, an applicant can access the endorsed versions of the documents, which can be printed or emailed for the purposes of service.

6.3 An applicant must give an endorsed copy of the creditor’s petition to the Official Receiver’s Office (AFSA) within two working days of filing (reg 13).

Filing fee

6.4 A fee is payable for filing a creditor’s petition. Different amounts are payable depending on whether the applicant is a corporation or an individual.  The filing fee amounts are available in Fees Payable.

6.5 If an applicant cannot afford this fee, they may be able to ask the Court to exempt them from having to pay it, or to defer the time for its payment. Information and the form to be used to request the Court to either exempt or defer payment can be obtained from the Registry or found in Fees Payable.

7. Documents to be filed with the creditor’s petition (rules 4.02 and 4.04)

7.1 The following documents must be filed with the Court in support of a creditor’s petition:

(a) Creditor’s petition (Form B6)

(b) Affidavit verifying paragraphs 1, 2 and 3 of petition that complies with rule 4.02 by someone who knows the relevant facts. As stated above, the affidavit may be in accordance with the affidavit set out in Part 2 of Form B6, or may be a separate document

(c) Affidavit of search verifying paragraph 4 of the petition that complies with rule 4.04 verifying whether or not an application has been made for an order setting aside the bankruptcy notice, and

(d) Affidavit of service of the bankruptcy notice, with a signed copy of the bankruptcy notice and copy of the judgment attached. A bankruptcy notice must be served by one of the methods provided for in reg 102 of the Regulations or in accordance with substituted service orders made under s 309 of the Bankruptcy Act and rule 3.01 of the Bankruptcy Rules.

8. Consent of registered trustee

8.1 Where a creditor wishes to have a private registered trustee appointed to administer a bankrupt estate, they must obtain that trustee’s written consent and serve it on the debtor. In addition, reg 47 of the Regulation provides that a trustee who signs a consent to act pursuant to s 156A of the Bankruptcy Act must file that consent with the Official Receiver (AFSA) on or before the day the debtor presents a debtor’s petition to AFSA or, if the debtor does not present a debtor’s petition to AFSA, before the day on which the Court makes a sequestration order against the debtor’s estate.

8.2 The original of the consent to act is not filed with the Court but with AFSA. However, the affidavit of service of the creditor’s petition must state how any consent to act as trustee was served on the debtor.

9. Service of creditor’s petition documents (rule 4.05 of the Bankruptcy Rules)

9.1 A petition (and accompanying documents referred to in rule 4.05) must be served personally (by hand) on the debtor unless an order for substituted service or deemed service has been obtained from the Court. More information on applying for a substituted service order can be found in Bankruptcy Information Sheet 3. The requirements for personal service of an originating document or a document starting legal proceedings are set out in rules 8.06, 10.01 and 10.12 of the Court Rules.

9.2 Under rule 4.05, the applicant must, at least 5 business days before the hearing date of the creditor’s petition, serve on the respondent the following documents:

(a) Creditor’s petition

(b) A copy of the affidavit verifying the petition required by s 47(1) of the Bankruptcy Act and rule 4.02

(c) A copy of the affidavit of search of both Courts’ electronic records required by rule 4.04

(d) A copy of the affidavit of service of the bankruptcy notice, and

(e) A copy of the Consent to Act as trustee (if applicable).

9.3 The creditor’s petition served on the respondent must be endorsed by the Court and bear the correct hearing date. If the creditor’s petition is not served 5 clear business days before the hearing date and an amended creditor’s petition is filed to obtain a new hearing date, the amended creditor’s petition bearing the new court date must be served on the Respondent. It is the applicant’s responsibility to ensure that the listing and hearing information on the creditor’s petition records the correct date, time and location for the day on which a matter is listed.

10. Affidavit of service of creditor’s petition documents (rule 4.06 of the Bankruptcy Rules)

10.1 After service of all the documents referred to in rules 4.02 and 4.05, an affidavit of service should be filed as soon as possible. The affidavit of service should depose to when and how the documents were served and the means by which the identification of the person served was established. The affidavit should be in Form 59 with the heading prescribed by rule 1.07(5).

10.2 The affidavit of service must have attached to it a copy of all the documents that were served.

11. Affidavits required at the hearing (rule 4.06 of the Bankruptcy Rules)

11.1 The applicant must file the following documents before the hearing pursuant to rule 4.06:

(a) Affidavit of service of the creditor’s petition and the further documents required by rule 4.05 (referred to in [9.2] and [10.1] above).

(b) Affidavit of search of the National Personal Insolvency Index: this is an affidavit of a person who has conducted a search of the NPII no earlier than the day before the hearing. The search must be a full extract, not a general name search, and undertaken using the full name of the respondent debtor with the correct spelling. The affidavit must set out the details of any references to the debtor in the Index and state that there are no details of any debt agreement in relation to the debt on which the applicant relies on the day the petition was presented. A copy of the search extract from the NPII must be attached to the affidavit.

(c) Affidavit of debt: this affidavit must be sworn by a person who knows the relevant facts stating that each debt on which the applicant relies is still owing and the amount of the debt. This affidavit must be sworn as soon as practical before the hearing. Generally, the affidavit of final debt should be sworn within 2 days of the hearing date.

(d) Affidavit of search if the debt stated in the creditor’s petition is an amount payable pursuant to a judgment of a Court that ordered the amount to be paid into the Court.

11.2 These affidavits should be in Form 59 with the heading from Form B1 as prescribed by rule 1.07(5). For more information on the formal requirements of an affidavit, see above at paragraph [4.3].

11.3 While the affidavit of service of the creditor’s petition should be filed as soon as possible, the remaining affidavits required by rule 4.06 may be filed the day before the hearing.

12. Hearing of the creditor’s petition (s 52(1) of the Bankruptcy Act)

12.1 A creditor’s petition is usually heard by a Judicial Registrar. The hearing or court date, time and place of the petition can be found on the cover page of the petition. It is a requirement that the creditor who is applying for the sequestration order (or a debtor who wishes to oppose the petition) must attend the court hearing. The failure of a creditor to attend may mean the petition is dismissed and if the debtor does not attend, it is likely that any notice of grounds of opposition will be dismissed and a sequestration order made in their absence.

12.2 At the hearing, the respondent may seek an adjournment of the petition or oppose the making of a sequestration order. In such cases, the Court will consider the respondent’s grounds of opposition or the reasons for requesting an adjournment before allowing the applicant to proceed on its petition. For general information on opposing a creditor’s petition, refer to Bankruptcy Information Sheet 3.

12.3 Unless the debtor’s grounds of opposition are upheld or an adjournment is granted,  the Court will usually make a sequestration order upon proof on affidavit at the hearing of the petition that the debtor has committed an act of bankruptcy within 6 months of presenting the petition; that a minimum liquidated debt of $10,000 was owed at the date of the act of bankruptcy referred to in the petition and remains owing at the date of the hearing of the petition; that the matters stated in the petition have been verified; that the petition has been properly served; and that all the final searches and updating affidavits comply with the requirements referred to in rule 4.06.

Note: a checklist of the requirements to obtain a sequestration order is set out in Information Sheet 2.

12.4 An applicant who has validly presented a creditor’s petition will ordinarily be awarded their costs of the application. If a costs order is sought, the applicant should prepare and file a short form bill of costs prior to the hearing.

12.5 Even if all the formal matters under s 52(1) of the Act are proven, the Court may adjourn or dismiss the creditor’s petition under s 33 or s 52(2) of the Bankruptcy Act respectively.

12.6 If a sequestration order is made, it will be sealed by the Court and made available online via the Commonwealth Courts Portal (CCP) within 24 hours. A sequestration order is in Form B7 of the Bankruptcy Rules. Further information about registering for the CCP is available online on the CCP.

13. Post sequestration steps (rule 4.07)

13.1 On the day the sequestration order is made, the applicant must advise the trustee in writing of the making of the order and his/her appointment (rule 4.07).

13.2 A copy of the sequestration order must be provided to the Official Receiver (AFSA) and the trustee within two working days of the order (rules 4.07 and 4.09). Further information on providing a copy of the order to AFSA is available on the AFSA website.

13.3 If the creditor’s petition is dismissed, the applicant must give a copy of the order to any person who had consented to act as trustee and the Official Receiver within two working days (rule 4.09).

Consequences of a sequestration order

13.4 Upon the making of a sequestration order, a trustee will be appointed to the debtor’s estate to manage their financial affairs. Unless a private registered trustee has given their written consent to act, the Official Receiver (administered by AFSA) will manage the bankrupt estate.  Further information on the consequences of bankruptcy is available on AFSA’s website.

14. Related practice materials

14.1 Debtors are also referred to the following related material:

• Guide for Practitioners and Parties in Bankruptcy Matters listed before a Judicial Registrar
• Bankruptcy Information Sheet 2: Creditor’s Petition Checklist
• Bankruptcy Information Sheet 3: Opposing a Creditor’s Petition
• Bankruptcy Information Sheet 4: Setting aside a Bankruptcy Notice
• Bankruptcy Information Sheet 5: Substituted Service Applications
• Bankruptcy Information Sheet 6: Consequences of a Sequestration Order
  
  

15. Other resources

15.1 Debtors who are self-represented litigants will be supported by the Registry to assist them through the court process efficiently. Refer to Information for Litigants for further information.

15.2 A self-representation service is available to litigants in each Registry. The service provides free, confidential and impartial legal advice and assistance with Federal Court and FCFCOA proceedings for individuals and community groups. For further details contact the nearest Registry.

15.3 In addition, debtors can also approach various ‘not for profit’ bodies for assistance and guidance and access free online information on bankruptcy and opposing a creditor’s petition including:

• LawRight (Queensland)
• Justice Connect
• Financial Rights Legal Centre
• Australian Financial Security Authority (AFSA)
  
  

16. Information on the Court’s online services

eLodgment

16.1 The Court provides an electronic lodgement (eLodgment) facility through which a document that commences a proceeding or is relevant to an existing proceeding may be lodged for filing online.

16.2 The use of eLodgment provides many benefits to court users.  It is available from each user’s computer at any time and provides a complete record of all lodgement transactions with the Court.

16.3 eLodgment also allows court users to lodge other documents regarding a proceeding, for example: a draft order, terms of consent and case management correspondence.

16.4 A party must be registered to use eLodgment. The eLodgment page includes information about registering, preparing and lodging documents.

eCourtroom

16.5 eCourtroom is a virtual courtroom that assists in the management of matters by allowing directions and final orders to be made online.

16.6 Once lodged, applications will be given a return date with the location as 'eCourtroom'. Practitioners must ensure that when an application is lodged, the full name and email address of the practitioner who will be conducting the eCourtroom hearing is provided at the foot of the first page of the application. More than one practitioner’s name and email address may be provided.

16.7 For each application, practitioners will receive a further email notifying them that the particular matter has been set up in eCourtroom. The Registrar allocated to deal with the matter will then communicate with each practitioner.

16.8 Before or on the eCourtroom return date the Registrar will:

(a) consider the filed evidence, any communications and the draft orders forwarded by the applicant; and

(b) make appropriate orders, notify parties (or the applicant in ex parte matters) and provide a sealed copy of the order.

Commonwealth Courts Portal

16.9 Filed documents in a matter can be viewed by parties or those authorised by a party on the Commonwealth Courts Portal. The Commonwealth Courts Portal (CCP) provides web-based services for court users to access information about cases before the Court. Parties may register for the CCP to gain access to documents which have been eLodged, as well as orders of the Court, judgments and listing events (past or future). More information about the CCP can be found in Online Services.

Federal Law Search

16.10 Alternatively, stamped court orders are also available online via Federal Law Search. The Federal Law Search facility provides selected information on cases to members of the public.

Updated July 2022