You've Been Served a Bankruptcy Notice.
What Can You Do in 21 Days?
THREE ROADS. NOTHING ELSE COUNTS.
We have covered the 21 days a company gets after a statutory demand.
This is the personal version:
once a bankruptcy notice lands, the clock is running.
By the day you open it, the 21 days have already started | Source: Pexels
01／What this piece of paper is
A bankruptcy notice is a formal demand for payment that a creditor, holding a court judgment against you, applies to AFSA to issue. It is not a lawyer's letter or a reminder. It is the first legal step in making you bankrupt. To get one issued, the creditor must hold a final judgment or order against you for at least $10,000 that has not been stayed and is no more than six years old. Once issued, it must be served on you within six months (unless AFSA extends the life of the notice).
From the date of service you have 21 days. That is all the time there is. Do nothing, and in law you have committed an "act of bankruptcy", which the creditor can rely on to ask the court to make you bankrupt (a sequestration order). AFSA's own wording is "generally 21 days, but in some instances the timeframe can differ", so go by the date printed on your notice.
When the 21 days start depends on how it was served: served by hand, from the day it was handed to you; by post, usually from the day it would arrive in the ordinary course of post; electronically, from the moment it was sent. Not from the day you opened the envelope.
02／Only three roads in 21 days
First, pay the debt in full. The simplest road, and the least travelled.
Second, make an arrangement to settle that is "to the creditor's satisfaction". Note those words: the creditor decides. A one-sided verbal promise, or a payment you send across on your own initiative, does not qualify. If you reach a deal, get it in writing.
Third, apply to the Federal Court to set aside the notice, or extend the time to comply. There are three families of grounds: you have already applied to set aside, or appealed, the underlying judgment in the court that made it; you have a counter-claim, set-off or cross demand against this creditor for at least the judgment amount, which could not have been raised in the original proceeding; or "other grounds", such as a substantial defect in the notice that goes to its validity, a problem with the underlying judgment, or a genuine and significant dispute about the amount the notice demands.
THREE HARD RULES FOR A SET-ASIDE APPLICATION
After 21 days the court has no power to set aside or extend
(unless relevant court proceedings were begun within the period, in which case the time for compliance may in some situations be extended by the court, or automatically by law)
Lodged after 4:30 pm on the last day is out of time
Assertions are not enough; the court needs evidence
Only three outcomes follow: the notice is set aside, so no act of bankruptcy this time, though the creditor can enforce the debt another way or apply for a fresh notice; the court extends time, and you have more room; or the application is dismissed, the act of bankruptcy stands, and the creditor's next step is a petition to make you bankrupt.
03／Three things not to do
Do not ignore it because "I don't owe this". Ignoring it is the act of bankruptcy. Even if you are right, you have to be right in court, inside 21 days.
Do not mistake a verbal promise for an "arrangement". Until the creditor confirms it is satisfied (ideally in writing), you are still on the clock.
Do not wait until day 20 to see a lawyer. A set-aside application means an affidavit, evidence, and getting the service date exactly right; it cannot be done in a day or two. See someone in week one and you have options. See someone in week three and you have a bill.
A footnote: the federal government has previously announced reforms to extend the period to 28 days and lift the threshold to $20,000. As at August 2026, the current rules published by AFSA and the Federal Court remain 21 days and $10,000; the official position at the time governs.
A bankruptcy notice is not a judgment.
It is the last window in which you still get to choose.
One right move inside 21 days is worth ten after they run out.
Sun Lawyers · Sydney Office
If you have just been served a bankruptcy notice, or you are about to issue one to someone who owes you, contact Sun Lawyers. We work in both English and Mandarin.
Phone: 02 9267 4988 ｜ Email: enquiry@sunlaws.com
Sydney Office: Suite 703 & 704, 265 Castlereagh Street, Sydney NSW 2000
Website: sunlaws.com.au
This article is general legal information only and is not legal advice.
Please contact us for advice specific to your situation.