DEBTORS MOVING OVERSEAS AND BANKRUPTCY
by Mae Lieb
Given that the world is now starting to come out of the “COVID coma” and there are overseas travel bubbles popping up, it may be a good time to think about what happens if an individual owes me money and goes overseas and looks like they won’t be returning.
You may think that a debtor moving overseas or relocating prevents a bankruptcy notice being served on them however, that is not the case.
If a debtor is unable to pay their debts, unable to enter into an arrangement with their creditors and have not voluntarily made themselves bankrupt, then a creditor to whom they owe $10,000 or more may apply to the Court to have the debtor be made bankrupt.
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 102 of the Bankruptcy Regulations 1966 provides guidance for service of bankruptcy notices to be affected in a number of ways other than personal service such as by email, facsimile or post. However, these methods of service unfortunately only apply to service of a bankruptcy notice. A Creditor’s Petition must be personally served. In certain circumstances, an order for substituted service can be obtained from the Court.
Section 40(g)(ii) of the Bankruptcy Act 1966 notes that the time of 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 for the 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 fulfil the underlying debt or prepare to make any applications to the Court before the expiry of the bankruptcy notice.
If a creditor serves a debtor by email or by any other means and then discovers the debtor was overseas at the time of service, the creditor can apply to the Court for orders confirming that service of the document has occurred and that the creditor can continue on with the application.
It can be a tricky proposition to make an individual bankrupt whilst they are overseas, so consideration is also needed to be given to the costs associated with pursing the claim. The creditor would also need to consider if the person does go bankrupt whilst they are overseas, what the real impact it will have on them. It may be the case that, if possible, a creditor should await their return.
Mae is a Financial Analyst at Condon Advisory Group. She specialises in Personal and Corporate Insolvency.