Cost of insolvency can be a deciding factor when thinking about enforcing a judgment or court order.
Updated for 2024 – 2025 financial year
The Cost of Bankruptcy
The filing fee for bankruptcy is $4,585.00 (corporate applicant) or $1,910.00 (human applicant) with short form amount of $3,125.00 allowable to be claimed, or if the petition is dismissed, the amount of $2,689.00.
Filing fee for an application for substituted service of a bankruptcy notice – $510.00 for both a corporate applicant and a human applicant.
For issuing a summons to a person, under section 50 or 81 of the Bankruptcy Act 1966 to attend examination about a debtor’s examinable affairs – $615.00 for both a corporate applicant and a human applicant.
Examination by a Registrar under section 50 or 81 of the Bankruptcy Act 1966 – for each day or part of a day – $2,340.00 for both a corporate applicant and a human applicant.
Cost of Winding Up in Insolvency
The filing fee for winding up in the Federal Court is $4,930.00 (corporate applicant) or $1,695.00 (human applicant) and the filing fee for winding up in the Supreme Court is $3,086.70 (corporate applicant) or $1,306.70 (human applicant).
The short form amount of $4,653.00 is allowable to be claimed by an applicant on the making of a sequestration order for legal costs.
The Cost of Insolvency
If you have an order of the Court or a Judgment, and you have not received payment as against that debt, then you are able to commence enforcement proceedings.
In certain circumstances, if the judgment debtor is a person, you are able to serve this debtor with a bankruptcy notice, or if the judgment debtor is a company, serving that debtor with a statutory demand.
Cost of Insolvency – Bankruptcy
The cost of insolvency application for a bankruptcy notice will cost a filing fee of $470.00 with Australian Financial Security Authority (AFSA) and approximately $600.00 plus GST to $800.00 plus GST and outgoings as an estimate of a solicitor’s professional fees plus $33.55 for a bankruptcy search.
If the judgment debtor does not comply with the bankruptcy notice then they will have committed an act of bankruptcy, allowing you to file a creditor’s petition.
The cost of insolvency for a creditor’s petition for a corporate applicant (if you are suing in your company name) will cost $4,585.00 or if you are suing in your personal name $1,910.00 as a filing fee in the Federal Circuit Court plus $3,125.00 plus GST and outgoings as an estimate of lawyers professional fees based on the short form amount for drafting the application and supporting affidavits. There will also be a hearing which we will need to attend at the lawyer’s hourly rate.
You are able to claim “costs as between party and party” which means:
the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation
including the issuance of the bankruptcy notice, the creditor’s petition and the hearing.
However it is more likely that the registrar will make an order for the short form costs in the application.
It is advisable that you instruct a solicitor to write to this debtor again prior to serving them with a bankruptcy notice, informing the debtor that you have instructed a solicitor to serve him with a bankruptcy notice, informing the debtor of the costs you will have to pay, which can be claimed on top of the judgement debt, again demanding that they pay the judgment sum within seven (7) days. This might encourage him to pay, or aid in any application for costs in the bankruptcy proceeding.
Costs of Insolvency – Statutory Demand and Winding Up
If your debtor is a company, and you think that the judgment debtor has assets then you can serve that company with a statutory demand for payment. Failure to comply with a statutory demand allows you to commence proceedings to wind up the company in liquidation. All assets, bank accounts etc. are frozen and realised to satisfy the creditors.
The cost of a solicitor drafting and serving a statutory demand will be around $800.00 plus GST and outgoings to $1,200.00 plus GST and outgoings as an estimate of their professional fees. If the judgment debtor does not respond then they are presumed to be insolvent. Based upon this presumption of insolvency you can apply to wind it up.
The cost of winding up a company for a corporate applicant (if you are suing in your company name) will cost $4,930.00 or if you commence proceedings in your personal name $1,695.00 as a filing fee in the Federal Court plus $4,653.00 plus GST and outgoings as an estimate of a solicitor’s professional fees based on the short form amount for drafting, filing and serving the originating process and supporting affidavits.
The cost of winding up a company for a corporate applicant (if you are suing in your company name) will cost $3,086.70 (corporate) or $1,306.70 (personal) as a filing fee in the Supreme Court.
There will also be a hearing which a solicitor will need to attend at their hourly rate.
Cost of Insolvency – Moving Forward
We recommend that you instruct a solicitor to write to the judgment debtor prior to serving them/it with a bankruptcy notice, or a statutory demand, informing the debtor of the costs you will have to pay, which can be claimed on top of the judgement debt, again demanding that he pay the judgment sum within seven (7) days.
This might encourage the judgment debtor to pay, or aid in any application for costs in the proceeding.
Alternatively, you can instruct a lawyer to commence one of the enforcement options outlined above.
The Costs of Insolvency – FAQ with Answers
Navigating the costs associated with insolvency proceedings can be complex, especially when considering enforcement through bankruptcy or winding up.
This FAQ section addresses some of the most common questions about the financial and legal aspects of insolvency in Australia, providing clarity for those considering these options.
What is the cost of filing for bankruptcy in Australia?
The filing fee for bankruptcy in Australia is $4,585.00 for a corporate applicant and $1,910.00 for an individual. Additional costs may include legal fees, examination fees, and other related expenses, such as a bankruptcy search fee of $33.55.
What are the costs associated with winding up a company in insolvency?
The filing fee for winding up a company in the Federal Court is $4,930.00 for a corporate applicant and $1,695.00 for an individual. In the Supreme Court, the fees are $3,086.70 for a corporate applicant and $1,306.70 for an individual. Legal fees for drafting and serving documents, as well as attending hearings, are also involved.
Can I recover costs if I enforce a judgment through bankruptcy or winding up proceedings?
Yes, you can claim “costs as between party and party,” which includes costs that have been fairly and reasonably incurred during litigation. However, it’s more common for the court to award short form costs, which may not cover all expenses.
What steps should I take before serving a bankruptcy notice or statutory demand?
It is advisable to instruct a solicitor to send a final demand to the debtor, informing them of the impending costs and demanding payment within seven days. This step may encourage the debtor to settle the debt, avoiding further legal action and expenses.
What happens if a company fails to comply with a statutory demand?
If a company fails to comply with a statutory demand, it is presumed to be insolvent, allowing you to initiate winding-up proceedings. The company’s assets, including bank accounts, may be frozen and liquidated to satisfy creditors.
These FAQs provide an overview of the financial implications and necessary steps involved in pursuing insolvency proceedings to enforce a judgment debt in Australia.
