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When is it time to start bankruptcy proceedings against a debtor?
20 March, 2012 | Peter Smith
Are you tired of chasing your debtors for payment or being drip fed monies owed? If you have already obtained judgment against a non-company creditor, maybe it is time you considered pursuing your debtors by way of bankruptcy proceedings.
Often creditors obtain judgment at the Disputes Tribunal, District Court or the High Court for payment of outstanding debts only to be faced with a debtor who has little or no means to repay the debt. Often debtors will enter into a repayment proposal to pay substantial debt by weekly, fortnightly or monthly instalments which may never be paid in full. If you are frustrated with this process then it is time to perhaps consider bankruptcy options.
The following steps are required to proceed to bankruptcy:
- Your lawyer will obtain a Certificate of Judgment from the District Court confirming that judgment was entered and that no monies have been paid.
- A Bankruptcy Notice is filed in the High Court and served on the debtor.
- Once the Bankruptcy Notice is served on the debtor they have 10 days from the date of service to comply with the Notice and pay the amount stated. If the debtor fails to pay this amount at the end of 10 days then they have committed an act of bankruptcy and your lawyer may proceed to file a Creditor’s Petition against them. An act of bankruptcy stays current for three months so a Creditor’s Petition can be filed any time during that three month period.
- The Creditor’s Petition states that your debtor has failed to pay the amount owing and this notice is once again served on them. The Petition contains a date of hearing in the High Court at which point your debtor is adjudicated bankrupt if the outstanding amount has not been paid.
- Once your debtor has been declared bankrupt then their financial affairs are controlled by the Official Assignee (appointed by the Court), including payment of all debts owed.