Bankruptcy Notice

What it is

A bankruptcy notice is a formal notice issued against an individual who owes a judgment debt above a set threshold, requiring them to pay within a fixed period. It is the personal-insolvency counterpart to a company statutory demand and is a serious enforcement step.

Failing to comply with the notice can amount to an act of bankruptcy, which a creditor may then rely on.

How it works

A creditor who holds a judgment debt can have a bankruptcy notice issued and served on the debtor. If the debtor does not pay, reach an arrangement or successfully challenge the notice within the time allowed, the creditor may apply to make the person bankrupt.

This is usually a last resort for substantial debts. Merion assesses whether it is commercially worthwhile for each matter at refer a debt.

Good to know

This is general information and not legal advice. Bankruptcy is governed by strict federal rules, minimum debt thresholds and time limits, and a notice must be issued and served correctly to have effect. Making someone bankrupt rarely results in full payment to a single creditor, because any available assets are shared among all creditors and a trustee's costs come out first. For these reasons a bankruptcy notice is generally weighed carefully against simpler options, such as a negotiated payment arrangement, before it is used on a commercial debt.