When can a Bankruptcy Notice be Set Aside?

31 August 2026 in Bankruptcy Lawyers | 4 min read

This article provides an overview of what may constitute a defect within a bankruptcy notice. Defects in bankruptcy notices may be errors, irregularities or misnomers, and they may render the document unenforceable. If you have been served with a bankruptcy notice or intend to serve a bankruptcy notice, we recommend seeking legal advice from our finance law team who offer 20-minute initial consultations, free of charge.

Overview

A bankruptcy notice is a formal demand issued by the Australian Financial Security Authority (AFSA) requiring a person to pay a judgement debt within 21 days or face the prospect of a creditors petition and possibly bankruptcy. Alternatively the person may seek to have the bankruptcy notice set aside within the 21 days. Bankruptcy can have serious consequences, therefore the law sets out specific requirements that a bankruptcy notice must satisfy.

Some errors, defects or irregularities can render a bankruptcy notice invalid, and it may be set aside. These errors may include an incorrect name, address, description of another party or another inaccuracy. It is important to note that not every mistake amounts to invalidity, and the courts tend to assess this on case by case basis against the relevant legislation.

The law distinguishes ‘formal defects’ from ‘substantive defects’.

Formal Defects in the Bankruptcy Notice

Section 306 of the Bankruptcy Act 1966 (Cth) stipulates that formal defects do not affect bankruptcy proceedings unless the court is of the opinion that substantial injustice has been caused by the defect and the injustice is not curable by court order.

Examples of Formal Defects in the Bankruptcy Notice

LFDB v MS S M (2018) FCA 1397

This case dealt with the setting aside of a bankruptcy notice by reason of defects. The defects were alleged to have arisen due to the use of pseudonyms in compliance with suppression orders.

Applicant Submissions included:

LFDB sought an order that the bankruptcy notice be set aside by reason of nullity due to its defects.

They relied on the ‘public interest policy’ to set aside the bankruptcy notice, arguing that there is a need to identify the parties accurately in order to fulfill public interest, as bankruptcy proceedings do not deal solely with private rights or obligations, it is a ‘change of status’ within society, per Culleton v Balwyn Nominees Pty Ltd (2017).

They argued the alleged defects deprived the bankruptcy notice of essential criteria, in that it failed to name any addressee; any creditor; the description of the purported creditor; and it is incapable of supporting a creditor’s petition or of fulfilling the public interest objectives of bankruptcy.

The above defects are alleged to arise because of the use of pseudonyms in the bankruptcy notice to name the debtor (the person who owes the money or has the debt) and creditor (the person the money is owed to or has the credit).

Judgement and Reasoning:

The Federal Court upheld the bankruptcy notice.

Markovic J concluded that the irregularity did not affect public interest policies because a bankruptcy notice is not a public document. A creditor’s petition and sequestration proceedings may have a public character, but the bankruptcy notice itself does not.

Given the parties’ prior litigation and orders annexed to the notice, the debtor could not reasonably have been uncertain about the creditor’s identity. Therefore, no substantial injustice occurred.

ANNE V ASK FUNDING LTD (2013) FCCA 1271; (2014) FCCA 1840

This case primarily dealt with a notice issued in a discarded former name. However, it was still valid because it sufficiently identified the person in question.

The judge concluded that there was no doubt that Ms Anne was the same person as Patricia Ann McBride who entered into the relevant loan agreements with the creditor.⁷

No basis was established upon which the bankruptcy notice ought to be set aside so the application was dismissed with costs.

Substantive Defects in the Bankruptcy Notice

Substantive defects within the notice are not caught by section 306 of the Bankruptcy Act 1966 and therefore may give rise to invalidity.

Examples of Substantive Defects in the Bankruptcy Notice

DIMASI & ANOR V NANGILOC COLIGNAN FARMS PTY LTD (NO.3) [2006] FMCA 1562 

This judgement deals with (among other things) a bankruptcy notice that incorrectly identified the second applicant and joint debtor as Michelina rather than Maria.

The bankruptcy notice identified Maria Dimasi as Michelina Dimasi. The error in the name of the second applicant appears to have occurred when lawyers for the respondent undertook a business name search of the records maintained by the Australian Business Register.

That search was done erroneously and provided results for a “Frank and Michelina Dimasi” located in Melbourne, rather than an extract for “F and M Dimasi” of Mildura. This error was fatal and not a ‘mere defect’ that could be cured by court order, nor section 306.⁹ The bankruptcy notice was different to the judgement on which it was based and therefore was set aside.

The Judge held that the bankruptcy notice against the second applicant be set aside.

The bankruptcy notice against the first applicant was upheld.

SARINA V O’SHANNASSY (NO 2) (2021) FCCA 338

This case primarily dealt with a defect in the notice that was deemed to be substantive rather than formal, avoiding the operation of section 306 of the Bankruptcy Act.

The bankruptcy notice specified a post-office box rather than a street address as the creditor’s address and as the place to which payment could be made.

The Judge held that providing a physical address at which the debtor could tender payment was an essential requirement of the bankruptcy notice form. The use of a PO box was a defect, and was not merely formal and therefore could not be cured under ss 306(1) or 33(1)(b) of the Bankruptcy Act

The creditor’s application to substitute a street address was dismissed and the bankruptcy notice was set aside.

Key Takeaways

1. Not every mistake invalidates a bankruptcy notice. A technical error or irregularity will not necessarily result in a bankruptcy notice being set aside.
2. The law distinguishes between formal and substantive defects. Formal defects may be overlooked in certain circumstances where no substantial injustice has occurred that is incurable by court order.
3. An incorrect name is not automatically fatal.
4. Serious errors can invalidate a bankruptcy notice.
5. It is important to do your due diligence in drafting a bankruptcy notice.

How can BSM Sydney Bankruptcy Lawyers assist you?

The bankruptcy and insolvency lawyers at Brander Smith McKnight Lawyers Sydney have extensive experience in when bankruptcies can be set aside. Our lawyers understand how difficult and limiting bankruptcy can be and will provide legal assistance to annul your bankruptcy prior to the prescribed 3 years. BSM Sydney Lawyers are talented and persuasive negotiators and have decades of experience in settling financial disputes with creditors and drafting proposals for bankruptcy annulments. Our senior bankruptcy lawyers offer a free 20-minute consultation to discuss your individual matter.

Brander Smith McKnight Lawyers has offices conveniently located in Sydney CBD, Sutherland, Parramatta, Shellharbour and Wollongong.