Oct 2017

Bankruptcy and overseas debtors

You might think that a debtor moving overseas or relocating prevents you from serving the debtor with a bankruptcy notice. Not so.

Pursuant to section 40(g) of the Bankruptcy Act 1966, with leave of the Court, an act of bankruptcy still occurs when a debtor fails to comply with a bankruptcy notice even if the bankruptcy notice has been served on a debtor overseas.

Regulation 16.01 of the Bankruptcy Regulations 1966 provides for service of bankruptcy notices to be effected by a number of ways other than personal service such as by post, facsimile or by email.

Unfortunately however, these methods of service only apply to service of a bankruptcy notice. A creditor’s petition must be personally served (although in certain circumstances an order for substituted service can be obtained from the Court).

If a creditor intends to serve a bankruptcy notice on a debtor located overseas, the creditor needs to obtain leave of the Court pursuant to section 40(g) of the Act.

Section 40(g)(ii) of the Bankruptcy Act 1966 provides that the time for compliance with a bankruptcy notice will be the time fixed by the Court that is considered ‘reasonable’ for the debtor to comply. This section allows to Court to extend the usual time a debtor has to comply with a bankruptcy notice (21 days) to ensure the debtor, depending on his or her location, has sufficient opportunity to receive the notice and take steps to satisfy the underlying debt or prepare and make any application to the Court before the expiry of the bankruptcy notice.

If a creditor serves a debtor, say by email and subsequently discovers the debtor was overseas at the time of service, the creditor can apply to the Court for orders validating that service.

For more information, please contact ERA Legal.