---
title: "Insolvency, Restructuring & Bankruptcy"
url: "https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy"
type: "practice_area"
site: "AI Law Framework"
id: "A8"
task_count: 34
last_reviewed: "2026-10-10"
---

# Insolvency, Restructuring & Bankruptcy

> Use complete financial and procedural records for restructuring or insolvency work. Verify dates, creditor positions and calculations, and reserve advice and statutory decisions to the responsible practitioner.

Canonical page: https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy  
Last reviewed: 2026-10-10

Site index for agents: https://ailawframework.com/llms.txt

Also covers: Corporate insolvency; external administration; voluntary administration; liquidation; receivership; small business restructuring (SBR); personal insolvency; bankruptcy; deeds of company arrangement (DOCA); safe harbour; winding up; public examinations (s 596A/596B); creditors' voluntary winding up (CVWU)

## Key facts

- Tasks: 34
- Green: 4, Yellow: 18, Red: 12
- Levels: Green is AI drafts and the lawyer checks; Yellow is lawyer and AI draft together; Red is the lawyer writes and AI may only check, clarify or collect data.

## Principles

- **Triage urgency before drafting**: Identify the process, appointment status and any notice or Court deadline first. Urgent legal action must not wait for a complete AI summary.
- **Keep financial and legal conclusions separate**: AI can organise cash-flow evidence, creditor documents and timelines. Solvency, safe harbour, disputed debts, priority and recovery strategy require specialist judgement on the actual evidence.
- **Record the useful evidence once**: Use a source-linked claims pack or issue schedule as the working record. Keep voting claims, dividend claims and procedural steps distinct, and record actual receipt or decisions rather than assuming them.

## Checklist

- Open each relied-on authority independently. Confirm its existence, current status, proposition and any quotation or pinpoint reference.
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Calculate operative dates independently from the current rule and actual triggering event. Check exceptions and record the verified deadline.
- Check the current court or regulator requirements, prescribed form and attachments for the intended document and filing.
- Confirm that the wording reflects the client’s instructions and contains no unintended admission, concession or commitment. Check the recipient and tone.
- Confirm that the actual tool, feature and processing terms permit use of this information, including access, retention, training and disclosure conditions.
- Obtain and inspect the relevant current official register or search result. Confirm identities, interests and the date and scope of the search.
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.

## Restrictions

- Confirm firm, client and applicable court or professional restrictions before using any AI feature.

## Jurisdiction note

Apply this guidance to the actual matter and jurisdiction. Confirm current requirements before relying on an example.

## Basis

Suggested practical workflows informed by current primary and professional sources. Confirm each source’s jurisdiction and scope.

## Current requirements

Triage urgency before drafting. Identify the process, appointment status and any notice or Court deadline first. Urgent legal action must not wait for a complete AI summary.

## Current requirements

Keep financial and legal conclusions separate. AI can organise cash-flow evidence, creditor documents and timelines. Solvency, safe harbour, disputed debts, priority and recovery strategy require specialist judgement on the actual evidence.

## Current requirements

Record the useful evidence once. Use a source-linked claims pack or issue schedule as the working record. Keep voting claims, dividend claims and procedural steps distinct, and record actual receipt or decisions rather than assuming them.

Also covers: Corporate insolvency; external administration; voluntary administration; liquidation; receivership; small business restructuring (SBR); personal insolvency; bankruptcy; deeds of company arrangement (DOCA); safe harbour; winding up; public examinations (s 596A/596B); creditors' voluntary winding up (CVWU)

Insolvency and restructuring combines high-stakes statutory obligations (Corporations Act 2001 Cth Pts 5.1–5.9; Bankruptcy Act 1966 Cth), court-supervised processes with immovable procedural deadlines, large-volume document and financial data analysis, and fiduciary duties owed simultaneously to creditors, courts, and regulators (ASIC, AFSA). AI carries acute risk here because: (a) hallucinated case citations or wrong statutory references in court filings trigger adverse costs orders and disciplinary exposure — Australian courts have now imposed indemnity costs (Murray v Victoria [2025] FCA 731) and the Federal Court's binding GPN-AI Practice Note (16 April 2026) mandates specific disclosure; (b) numerical errors in dividend calculations or solvency modelling cause direct, traceable creditor loss; (c) insolvency files contain the most sensitive debtor financial data in any law firm — feeding this to unvetted AI platforms breaches APP 11 and ASCR Rule 9 and may waive legal professional privilege; and (d) the "black box" problem directly conflicts with the external administrator's duty to maintain auditable, explainable decision records under the ARITA Code and Corporations Act. The "policy theatre" risk is especially acute: insolvency practitioners face daily pressure to process high volumes of documents quickly, making informal AI use far more likely than any policy contemplates.

## Limits on AI assistance

Red lines — never in this area

## Limits on AI assistance

AI must never produce a final, signed, or lodged court document (originating process, affidavit, written submission) without a lawyer independently verifying every citation, figure, and factual assertion. The Federal Court GPN-AI Practice Note (16 April 2026) now mandatorily requires disclosure of AI use in documents filed with the Court. Australian courts have imposed indemnity costs for AI-hallucinated citations: Murray v Victoria [2025] FCA 731 (Federal Court); Handa & Mallick [2024] FedCFamC2F 957 (Federal Circuit and Family Court). AI must never perform or be relied on for the final dividend calculation or creditor distribution waterfall. Arithmetic errors cause direct, traceable monetary loss to creditors and trigger personal liability for the external administrator — including ARITA professional standards consequences. Confidential insolvency client data (ROCAP, financial statements, director interview notes, examination transcripts, creditor schedules) must never be uploaded to a public or consumer-grade AI tool. Doing so breaches ASCR Rule 9 (confidentiality), APP 11 (security), and — where the data includes examination transcripts subject to a court restriction order — may constitute contempt of court. AI must never form or express the professional solvency opinion required for a safe harbour engagement (s 588GA), a proof-of-debt admission, or a statutory declaration to ASIC. These are personal certifications of the registered practitioner and cannot be delegated to or derived from AI output. AI must never be relied on to apply the unfair preference running account rules without a lawyer independently verifying the analysis against Bryant v Badenoch [2023] HCA 2 (peak indebtedness abolished) and Metal Manufactures v Morton [2023] HCA 1 (no set-off). AI trained before or shortly after February 2023 may still apply the superseded peak indebtedness approach, producing materially wrong quantum calculations. AI must never autonomously generate or submit ASIC statutory forms (Form 505, Form 509, s 533 report) or AFSA lodgements. Prescribed form compliance is strict; lodgement errors can invalidate an appointment or expose the practitioner to regulatory sanction from ASIC or AFSA. AI must never be used to adjudicate disputed creditor claims without full lawyer review. Admission or rejection of a proof of debt is the external administrator's statutory act, carries personal liability consequences, and requires legal judgment on evidentiary sufficiency — it cannot rest on AI output alone. AI must not be used to produce content on behalf of a registered trustee in bankruptcy or liquidator in any AFSA or ASIC investigation without explicit disclosure to the regulator, consistent with the ARITA Code of Professional Practice transparency and accountability requirements.

- AI must never produce a final, signed, or lodged court document (originating process, affidavit, written submission) without a lawyer independently verifying every citation, figure, and factual assertion. The Federal Court GPN-AI Practice Note (16 April 2026) now mandatorily requires disclosure of AI use in documents filed with the Court. Australian courts have imposed indemnity costs for AI-hallucinated citations: Murray v Victoria [2025] FCA 731 (Federal Court); Handa & Mallick [2024] FedCFamC2F 957 (Federal Circuit and Family Court).
- AI must never perform or be relied on for the final dividend calculation or creditor distribution waterfall. Arithmetic errors cause direct, traceable monetary loss to creditors and trigger personal liability for the external administrator — including ARITA professional standards consequences.
- Confidential insolvency client data (ROCAP, financial statements, director interview notes, examination transcripts, creditor schedules) must never be uploaded to a public or consumer-grade AI tool. Doing so breaches ASCR Rule 9 (confidentiality), APP 11 (security), and — where the data includes examination transcripts subject to a court restriction order — may constitute contempt of court.
- AI must never form or express the professional solvency opinion required for a safe harbour engagement (s 588GA), a proof-of-debt admission, or a statutory declaration to ASIC. These are personal certifications of the registered practitioner and cannot be delegated to or derived from AI output.
- AI must never be relied on to apply the unfair preference running account rules without a lawyer independently verifying the analysis against Bryant v Badenoch [2023] HCA 2 (peak indebtedness abolished) and Metal Manufactures v Morton [2023] HCA 1 (no set-off). AI trained before or shortly after February 2023 may still apply the superseded peak indebtedness approach, producing materially wrong quantum calculations.
- AI must never autonomously generate or submit ASIC statutory forms (Form 505, Form 509, s 533 report) or AFSA lodgements. Prescribed form compliance is strict; lodgement errors can invalidate an appointment or expose the practitioner to regulatory sanction from ASIC or AFSA.
- AI must never be used to adjudicate disputed creditor claims without full lawyer review. Admission or rejection of a proof of debt is the external administrator's statutory act, carries personal liability consequences, and requires legal judgment on evidentiary sufficiency — it cannot rest on AI output alone.
- AI must not be used to produce content on behalf of a registered trustee in bankruptcy or liquidator in any AFSA or ASIC investigation without explicit disclosure to the regulator, consistent with the ARITA Code of Professional Practice transparency and accountability requirements.

## Jurisdiction-specific considerations

Australian traps

## Jurisdiction-specific considerations

Federal Court GPN-AI Practice Note (16 April 2026) is now binding, not a watch-and-wait notice. It mandatorily requires disclosure of AI use in documents filed with the Court — at the start of the document, identifying where and how AI was used. This applies to all insolvency litigation in the Federal Court. The draft's reference to an April 2025 'notice to the profession' is superseded. NSW Supreme Court Practice Note SC Gen 23 (effective 3 February 2025) requires disclosure of AI use in court documents and, for expert reports, mandates annexing the prompts given and outputs used. Applies to all civil proceedings including insolvency matters in the NSW Supreme Court. Queensland Supreme Court Practice Direction 5 of 2025 (issued 24 September 2025) makes practitioners personally responsible for accuracy of AI-assisted submissions, authorises referral to the Legal Services Commission for hallucinated citations, and may result in personal costs orders. Additional QLD guidelines were issued in October 2025 covering courts and tribunals. Bryant v Badenoch Integrated Logging [2023] HCA 2 abolished the peak indebtedness rule for unfair preference claims under s 588FA(3). Liquidators must now assess the running account from the start to the end of the relation-back period — not from the peak. AI trained before or shortly after February 2023 will apply the superseded rule, overstating recoverable quantum. This case must be verified alongside Metal Manufactures v Morton [2023] HCA 1 (no s 553C set-off) in any preference demand or defence. Corporations Act 2001 (Cth) and Insolvency Practice Rules (Corporations) 2016 are the primary corporate insolvency sources — AI training data frequently reflects superseded prescribed form numbers and monetary thresholds. Verify prescribed forms against the Federal Register of Legislation before every use. Bankruptcy Act 1966 (Cth) and Insolvency Practice Rules (Bankruptcy) 2016 govern personal insolvency — the regimes are distinct. AI frequently conflates the two: the priority waterfall (s 556 Corporations Act vs s 109 Bankruptcy Act), relation-back periods, and available defences differ materially. This is among the most common AI error modes in Australian insolvency. ASIC Regulatory Guide RG 217 was materially revised on 6 December 2024 with updated safe harbour guidance for directors under s 588GA. AI trained before this revision will give outdated advice on the four safe harbour documentation requirements. Any safe harbour memo must be verified against the current RG 217. SBR $1 million liability cap (Pt 5.3B Corporations Act) excludes employee entitlements from the calculation — but all employee entitlements due and payable must be current before appointment. AI frequently omits the exclusion, either overstating or understating apparent eligibility. ASIC REP 810 (27 June 2025) found widespread eligibility verification failures; heightened regulatory scrutiny applies. Director penalty notice (DPN) regime under Tax Administration Act 1953 has specific personal liability trigger dates for PAYG and SGC withholding: the 3-month lock-down period and 30-day remittance window differ. AI frequently misstates these timeframes; always verify against ATO correspondence directly. Privacy and Other Legislation Amendment Act 2024 (Cth): automated decision-making transparency obligations under APP 1.7 commence 10 December 2026. Insolvency practitioners using AI in proof-of-debt adjudication or dividend calculation may need to disclose AI use in their APP Privacy Policy and notify affected creditors. OAIC infringement notices and civil penalties apply for non-compliance. PPSA searches must be conducted in real time on the PPSR (ppsr.gov.au); AI cannot access the live register and any AI-generated summary of security interests is unreliable for transactional, receivership, or DOCA purposes. A practitioner who distributes assets on the basis of an AI-generated security assessment risks clawback from undisclosed perfected secured creditors. Legal professional privilege over insolvency documents may be waived if the document (ROCAP content, director interview notes, DOCA draft terms) is uploaded to a consumer AI platform, because that constitutes voluntary disclosure to a third party. The Federal Court GPN-AI Practice Note specifically flags confidential and protected information as a caution area. This risk is heightened in litigation-adjacent matters where privilege is actively contested.

- Federal Court GPN-AI Practice Note (16 April 2026) is now binding, not a watch-and-wait notice. It mandatorily requires disclosure of AI use in documents filed with the Court — at the start of the document, identifying where and how AI was used. This applies to all insolvency litigation in the Federal Court. The draft's reference to an April 2025 'notice to the profession' is superseded.
- NSW Supreme Court Practice Note SC Gen 23 (effective 3 February 2025) requires disclosure of AI use in court documents and, for expert reports, mandates annexing the prompts given and outputs used. Applies to all civil proceedings including insolvency matters in the NSW Supreme Court.
- Queensland Supreme Court Practice Direction 5 of 2025 (issued 24 September 2025) makes practitioners personally responsible for accuracy of AI-assisted submissions, authorises referral to the Legal Services Commission for hallucinated citations, and may result in personal costs orders. Additional QLD guidelines were issued in October 2025 covering courts and tribunals.
- Bryant v Badenoch Integrated Logging [2023] HCA 2 abolished the peak indebtedness rule for unfair preference claims under s 588FA(3). Liquidators must now assess the running account from the start to the end of the relation-back period — not from the peak. AI trained before or shortly after February 2023 will apply the superseded rule, overstating recoverable quantum. This case must be verified alongside Metal Manufactures v Morton [2023] HCA 1 (no s 553C set-off) in any preference demand or defence.
- Corporations Act 2001 (Cth) and Insolvency Practice Rules (Corporations) 2016 are the primary corporate insolvency sources — AI training data frequently reflects superseded prescribed form numbers and monetary thresholds. Verify prescribed forms against the Federal Register of Legislation before every use.
- Bankruptcy Act 1966 (Cth) and Insolvency Practice Rules (Bankruptcy) 2016 govern personal insolvency — the regimes are distinct. AI frequently conflates the two: the priority waterfall (s 556 Corporations Act vs s 109 Bankruptcy Act), relation-back periods, and available defences differ materially. This is among the most common AI error modes in Australian insolvency.
- ASIC Regulatory Guide RG 217 was materially revised on 6 December 2024 with updated safe harbour guidance for directors under s 588GA. AI trained before this revision will give outdated advice on the four safe harbour documentation requirements. Any safe harbour memo must be verified against the current RG 217.
- SBR $1 million liability cap (Pt 5.3B Corporations Act) excludes employee entitlements from the calculation — but all employee entitlements due and payable must be current before appointment. AI frequently omits the exclusion, either overstating or understating apparent eligibility. ASIC REP 810 (27 June 2025) found widespread eligibility verification failures; heightened regulatory scrutiny applies.
- Director penalty notice (DPN) regime under Tax Administration Act 1953 has specific personal liability trigger dates for PAYG and SGC withholding: the 3-month lock-down period and 30-day remittance window differ. AI frequently misstates these timeframes; always verify against ATO correspondence directly.
- Privacy and Other Legislation Amendment Act 2024 (Cth): automated decision-making transparency obligations under APP 1.7 commence 10 December 2026. Insolvency practitioners using AI in proof-of-debt adjudication or dividend calculation may need to disclose AI use in their APP Privacy Policy and notify affected creditors. OAIC infringement notices and civil penalties apply for non-compliance.
- PPSA searches must be conducted in real time on the PPSR (ppsr.gov.au); AI cannot access the live register and any AI-generated summary of security interests is unreliable for transactional, receivership, or DOCA purposes. A practitioner who distributes assets on the basis of an AI-generated security assessment risks clawback from undisclosed perfected secured creditors.
- Legal professional privilege over insolvency documents may be waived if the document (ROCAP content, director interview notes, DOCA draft terms) is uploaded to a consumer AI platform, because that constitutes voluntary disclosure to a third party. The Federal Court GPN-AI Practice Note specifically flags confidential and protected information as a caution area. This risk is heightened in litigation-adjacent matters where privilege is actively contested.

## Risks to address

How it goes wrong

## Risks to address

Hallucinated case citations in winding-up applications, preference demands, or examination affidavits. Australian courts have imposed indemnity costs: Murray v Victoria [2025] FCA 731 (Federal Court, April 2025). In insolvency litigation, a hallucinated authority fails at a hearing and may damage the client's position irrecoverably while exposing the practitioner to disciplinary referral. Wrong application of the unfair preference running account rules. AI trained before February 2023 will apply the peak indebtedness rule (abolished by Bryant v Badenoch [2023] HCA 2) and may also allow a set-off defence (abolished by Metal Manufactures v Morton [2023] HCA 1). An AI-generated preference demand based on pre-February 2023 law overstates the claim and may be successfully defended, producing a costs order against the liquidator. Conflation of corporate and personal insolvency regimes. AI frequently applies Corporations Act provisions (s 556 priority waterfall, 6-month relation-back period, voidable transaction categories) to Bankruptcy Act matters and vice versa. In a personal bankruptcy estate, applying the wrong priority order causes incorrect distributions and exposes the trustee to personal liability. Arithmetic errors in dividend calculation. Legal AI tools (including specialised RAG-based tools) still hallucinate at rates of 17–34% (Magesh et al. 2025). A 1-cent-per-dollar error across a large creditor pool causes traceable monetary loss and exposes the liquidator to personal liability; the error is extremely difficult to reverse after distribution. Outdated RG 217 safe harbour advice. AI trained before December 2024 will omit or misstate the four-step documentation requirement in the current RG 217. A director who relies on an AI-generated safe harbour memo that does not meet the current ASIC requirements has no defence to an insolvent trading claim despite incurring costs on professional advice. Stale or fabricated PPSA security assessment. AI may assert a security interest exists, has lapsed, or is unperfected based on training-data information rather than a live PPSR search. A receiver or administrator who distributes assets on this basis faces clawback from perfected secured creditors whose interests were not visible in the AI output.

- Hallucinated case citations in winding-up applications, preference demands, or examination affidavits. Australian courts have imposed indemnity costs: Murray v Victoria [2025] FCA 731 (Federal Court, April 2025). In insolvency litigation, a hallucinated authority fails at a hearing and may damage the client's position irrecoverably while exposing the practitioner to disciplinary referral.
- Wrong application of the unfair preference running account rules. AI trained before February 2023 will apply the peak indebtedness rule (abolished by Bryant v Badenoch [2023] HCA 2) and may also allow a set-off defence (abolished by Metal Manufactures v Morton [2023] HCA 1). An AI-generated preference demand based on pre-February 2023 law overstates the claim and may be successfully defended, producing a costs order against the liquidator.
- Conflation of corporate and personal insolvency regimes. AI frequently applies Corporations Act provisions (s 556 priority waterfall, 6-month relation-back period, voidable transaction categories) to Bankruptcy Act matters and vice versa. In a personal bankruptcy estate, applying the wrong priority order causes incorrect distributions and exposes the trustee to personal liability.
- Arithmetic errors in dividend calculation. Legal AI tools (including specialised RAG-based tools) still hallucinate at rates of 17–34% (Magesh et al. 2025). A 1-cent-per-dollar error across a large creditor pool causes traceable monetary loss and exposes the liquidator to personal liability; the error is extremely difficult to reverse after distribution.
- Outdated RG 217 safe harbour advice. AI trained before December 2024 will omit or misstate the four-step documentation requirement in the current RG 217. A director who relies on an AI-generated safe harbour memo that does not meet the current ASIC requirements has no defence to an insolvent trading claim despite incurring costs on professional advice.
- Stale or fabricated PPSA security assessment. AI may assert a security interest exists, has lapsed, or is unperfected based on training-data information rather than a live PPSR search. A receiver or administrator who distributes assets on this basis faces clawback from perfected secured creditors whose interests were not visible in the AI output.

## Review checklist

The lawyer's review checklist

## Review checklist

Verify every case citation against AustLII or LexisNexis AU: confirm the case exists, the citation is correct, the paragraph reference is accurate, and the principle stated by AI matches the headnote and ratio. For preference analysis, confirm both Metal Manufactures v Morton [2023] HCA 1 and Bryant v Badenoch [2023] HCA 2 are correctly applied (no set-off; peak indebtedness abolished). Indemnity costs have been ordered for AI-hallucinated citations in Australian courts. Check every statutory reference (section, subsection, schedule, rule number, prescribed form number) against the current version on the Federal Register of Legislation — insolvency legislation and prescribed forms change by regulation without Act amendment; AI training data lags these changes. Confirm all dates and deadlines are independently calendared: voluntary administration meeting window (s 439A: 20 business days from appointment, extendable); DOCA execution after creditor resolution (15 business days); ASIC Form 505 lodgement (2 business days from appointment); SBR plan preparation (20 business days); SBR creditor voting (15 business days); s 533 ASIC report (6 months from appointment); bankruptcy notice 21-day compliance period. Never rely on AI-calculated deadlines. Reconcile every financial figure against a source document (financial statement, bank statement, ROCAP, creditor schedule, proof of debt). AI arithmetic on multi-step financial calculations is unreliable; errors in solvency assessments, dividend calculations, and preference claim quantum have direct monetary consequences and create personal liability for the external administrator. Confirm AI-generated SBR eligibility assessments against live records: (1) total liabilities excluding employee entitlements do not exceed $1M — verify against current balance sheet; (2) all employee entitlements due and payable are current — verify with ATO; (3) all tax lodgements current — verify with ATO; (4) no prior SBR or VA in 7 years — verify against ASIC Connect. Confirm the data handling path: identify what client information was supplied to an AI tool; confirm it was processed only in an approved enterprise environment with no data-retention or model-training rights; document this in the file. Examination transcripts subject to court restriction orders must never be uploaded to any AI tool without specific court authority. For all documents filed with the Federal Court: comply with GPN-AI Practice Note (16 April 2026) — include mandatory disclosure at the start of the document identifying where and how AI was used. For NSW Supreme Court filings: comply with SC Gen 23 (effective 3 February 2025). For Queensland Supreme Court filings: comply with Practice Direction 5 of 2025 (24 September 2025). Check the applicable practice direction for every court and jurisdiction before filing. Confirm the external administrator's personal certifications (proof-of-debt admissions/rejections, statutory reports to ASIC under s 533, AFSA bankruptcy trustee declarations) have been made by the registered practitioner on verified facts, not AI-generated summaries, and that the practitioner's registration is current on ASIC Connect / AFSA register.

- Verify every case citation against AustLII or LexisNexis AU: confirm the case exists, the citation is correct, the paragraph reference is accurate, and the principle stated by AI matches the headnote and ratio. For preference analysis, confirm both Metal Manufactures v Morton [2023] HCA 1 and Bryant v Badenoch [2023] HCA 2 are correctly applied (no set-off; peak indebtedness abolished). Indemnity costs have been ordered for AI-hallucinated citations in Australian courts.
- Check every statutory reference (section, subsection, schedule, rule number, prescribed form number) against the current version on the Federal Register of Legislation — insolvency legislation and prescribed forms change by regulation without Act amendment; AI training data lags these changes.
- Confirm all dates and deadlines are independently calendared: voluntary administration meeting window (s 439A: 20 business days from appointment, extendable); DOCA execution after creditor resolution (15 business days); ASIC Form 505 lodgement (2 business days from appointment); SBR plan preparation (20 business days); SBR creditor voting (15 business days); s 533 ASIC report (6 months from appointment); bankruptcy notice 21-day compliance period. Never rely on AI-calculated deadlines.
- Reconcile every financial figure against a source document (financial statement, bank statement, ROCAP, creditor schedule, proof of debt). AI arithmetic on multi-step financial calculations is unreliable; errors in solvency assessments, dividend calculations, and preference claim quantum have direct monetary consequences and create personal liability for the external administrator.
- Confirm AI-generated SBR eligibility assessments against live records: (1) total liabilities excluding employee entitlements do not exceed $1M — verify against current balance sheet; (2) all employee entitlements due and payable are current — verify with ATO; (3) all tax lodgements current — verify with ATO; (4) no prior SBR or VA in 7 years — verify against ASIC Connect.
- Confirm the data handling path: identify what client information was supplied to an AI tool; confirm it was processed only in an approved enterprise environment with no data-retention or model-training rights; document this in the file. Examination transcripts subject to court restriction orders must never be uploaded to any AI tool without specific court authority.
- For all documents filed with the Federal Court: comply with GPN-AI Practice Note (16 April 2026) — include mandatory disclosure at the start of the document identifying where and how AI was used. For NSW Supreme Court filings: comply with SC Gen 23 (effective 3 February 2025). For Queensland Supreme Court filings: comply with Practice Direction 5 of 2025 (24 September 2025). Check the applicable practice direction for every court and jurisdiction before filing.
- Confirm the external administrator's personal certifications (proof-of-debt admissions/rejections, statutory reports to ASIC under s 533, AFSA bankruptcy trustee declarations) have been made by the registered practitioner on verified facts, not AI-generated summaries, and that the practitioner's registration is current on ASIC Connect / AFSA register.

## Statutory demand check

In the compilation of 27 August 2026, section 459E(1) allows a demand for one debt, or two or more debts, that the company owes the creditor, that are due and payable, and that are at least the statutory minimum. Section 9 defines that minimum as a prescribed amount greater than $2,000, or otherwise $2,000. Regulation 5.4.01AAA, in the compilation of 1 September 2026, prescribes $4,000 otherwise, and $20,000 for a company eligible for temporary restructuring relief. Paragraphs (1)(a) and (2)(a) of that regulation do not apply to a statutory demand served on or after 1 August 2021. Form 509H note 2, in the same compilation, says the amount must exceed the statutory minimum, describes $2,000 or a greater prescribed amount, and says that from 1 July 2021 the greater amount prescribed is $4,000. Section 459E(3) requires an accompanying affidavit unless the debt, or each of the debts, is a judgment debt. Form 7 paragraph 5, in the Federal Court rules, includes the deponent’s belief that there is no genuine dispute about the existence or amount.

## Statutory demand check

Schedule 1 item 51H of the Corporations Regulations, compilation of 1 September 2026, prescribes Form 509H for paragraph 459E(2)(e). The form requires the company’s name and ACN or ARBN, the registered office, the debt or the total of the debts, the statutory-period words after service, the section 459G warning, an address for service in the State or Territory where the demand is served, and a schedule. Note 1 says the form is signed by the creditor or the creditor’s solicitor, and may be signed for a partnership by a partner and for a corporation by a director, the secretary or a senior manager. Federal Court rule 5.2 says the accompanying affidavit must be in accordance with Form 7, be made by the creditor or a person with the authority of the creditor, and must not state a proceeding number or refer to a Court proceeding in any heading or title. Form 7 asks for the relationship to the creditor, the authority and source of knowledge where needed, a statement that the debt is due and payable, and the deponent’s belief that there is no genuine dispute. Its note lets the opening words and jurat follow the State or Territory where it is sworn, which is also rule 2.6. GPN-AI, issued 16 April 2026, says at paragraphs 4.7 and 4.8 that an affidavit must reflect the deponent’s own recollection, knowledge or experience. Paragraphs 4.10 and 4.11 require disclosure, at the start of the document, where generative AI summarised or analysed information the witness relies on, or was used in a way that might affect admissibility or the use the Court makes of the evidence. Paragraph 3.1 applies the note to persons who appear before or file documents with the Court. C&C-1 Schedule 1 paragraph 22 limits a section 233 affidavit to five pages. That limit was not read as applying to Form 7.

## Statutory demand check

Section 459G(2), in the compilation of 27 August 2026, says an application to set aside a statutory demand may only be made within the statutory period after the demand is served. Section 459G(3) says the application is made in accordance with that section only if, within that period, an affidavit supporting the application is filed and a copy of the application and of that affidavit are served on the person who served the demand. Section 9 defines the statutory period as a prescribed period longer than 21 days, or otherwise 21 days. Regulation 5.4.01AAA(2) prescribes 6 months for a company eligible for temporary restructuring relief, and otherwise 21 days. Subregulation (3) says the 6-month limb does not apply to a statutory demand served on or after 1 August 2021. Form 509H paragraph 3 uses “within the statutory period after service”, and note 5 says the statutory period is 21 days or a longer prescribed period. Section 109X(1) permits service on a company by leaving the document at, or posting it to, the registered office; by delivering a copy personally to a director who resides in Australia or an external Territory; or, where a liquidator, administrator or restructuring practitioner has been appointed, by leaving it at or posting it to the address in the most recent notice of that address lodged with ASIC. No weekend or business-day reckoning was read into that period.

## Tasks (34)

| Task | Level | How AI is used | What the lawyer must review |
| --- | --- | --- | --- |
| [Assemble a creditor proof-of-debt evidence pack](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/assemble-a-creditor-proof-of-debt-evidence-pack.md) | Yellow | Reconcile invoices, credits and payment records into a schedule and index the documents supporting the creditor’s claimed balance. | Verify the creditor, basis and amount of the claim Distinguish the relevant voting or dividend process Approve the actual proof and supporting documents |
| [Organise the evidence for an urgent solvency review](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/organise-the-evidence-for-an-urgent-solvency-review.md) | Red | Create a dated evidence index of cash, overdue debts, commitments and forecasts; flag missing or inconsistent records without issuing a solvency conclusion. | Assess the financial position and legal consequences with specialist input Separate reliable current information from forecasts or management assurances |
| [Triage a statutory demand and preserve the service evidence](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/triage-a-statutory-demand-and-preserve-the-service-evidence.md) | Red | Index the demand, accompanying material and service records into a factual timeline, leaving disputed dates and debt issues explicitly unresolved. | Verify service, the timetable and the available response urgently with an insolvency litigator Do not rely on AI for the controlling deadline or grounds for… |
| [Assemble the facts for a solvency review and safe-harbour discussion](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/assemble-the-facts-for-a-solvency-review-and-safe-harbour-discussion.md) | Red | From the supplied accounts and cash-flow papers, list solvency indicators, related-party payments and documents still needed for a safe-harbour discussion. | Form the solvency opinion yourself Check timing, books and advice taken against source records before a director relies on the note |
| [Prepare appointment papers for administration, liquidation or receivership](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/prepare-appointment-papers-for-administration-liquidation-or-receivershi.md) | Red | From the appointor's instructions, the ASIC company extract and the PPSR and title searches, the tool builds the appointment checklist set by the Act and the… | The lawyer confirms the appointment is validly made and that each consent, ASIC form and creditor notice is the current version, correctly addressed and… |
| [Draft the administrator's or trustee's report to creditors](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/draft-the-administrator-s-or-trustee-s-report-to-creditors.md) | Yellow | Draft narrative sections of the report to creditors from the company's records and the proposal on the file, with every figure tagged to a source or marked as… | Leave the recommendation to the practitioner Check statutory disclosures against the current rules Reconcile every number to source data before the report… |
| [Draft a deed of company arrangement or comparable restructuring deed](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/draft-a-deed-of-company-arrangement-or-comparable-restructuring-deed.md) | Yellow | Draft a restructuring deed from the term sheet covering the fund, moratorium, administrator role and distribution waterfall, listing non-standard terms to… | Negotiate every commercial term Check secured-creditor treatment, employee priority and execution deadlines Check them against the signed resolution and live… |
| Review proofs of debt and draft the dividend schedule | Red | Compare each proof with the company's records, flag incomplete proofs and draft a working admitted/rejected/need-more-info schedule. | Leave admission of proofs to the appointee Do not treat a generated schedule as an adjudication |
| [Build a voidable-transaction and preference issues table](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/build-a-voidable-transaction-and-preference-issues-table.md) | Yellow | From bank statements and payables, build a chronology for the relation-back or preference window and flag candidate voidable payments with dates and amounts. | Verify every date and amount against bank records Analyse insolvency, running accounts and related-party look-back on contemporaneous documents |
| [Draft the statutory report to the insolvency regulator](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/draft-the-statutory-report-to-the-insolvency-regulator.md) | Yellow | Draft a narrative misconduct report from interview notes, the report as to affairs and financial analysis, tagging each allegation to a source document. | Certify the report only when every fact has an identified source Separate offences from civil breaches before anything is lodged |
| [Prepare public-examination topics, documents and a hearing pack](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/prepare-public-examination-topics-documents-and-a-hearing-pack.md) | Yellow | From the documents produced, the books and records and any earlier examination transcript the lawyer has cleared, work up with the lawyer the examination… | Scope, privilege and the court order limit the examination, so settle the topics and the questions yourself against the summons and production order as… |
| [Draft winding-up, preference-recovery or stay application papers](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/draft-winding-up-preference-recovery-or-stay-application-papers.md) | Red | From the demand, the affidavits already sworn and the company extracts, build a dated chronology that cites the source document for every entry, and index the… | Decide standing, service and current forms yourself Verify every exhibit against the file |
| [Prepare personal-insolvency papers: bankruptcy notice, petition or equivalent](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/prepare-personal-insolvency-papers-bankruptcy-notice-petition-or-equival.md) | Yellow | Draft a bankruptcy notice, petition or equivalent papers from the judgment and debt evidence, with a forms-and-service checklist.… | Use the prescribed forms strictly Match names, amounts and dates to the judgment itself Do not mix personal and corporate insolvency regimes |
| [Decide whether the debt can support a creditor’s statutory demand](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/decide-whether-the-debt-can-support-a-creditor-s-statutory-demand.md) | Red | Extract invoice dates, credits and payments into a schedule of amounts said to be due, and flag any description that does not match the proposed demand. | Work from section 459E, regulation 5.4.01AAA and Form 509H Treat the schedule as an aid only Decide whether to demand on the source documents |
| [Check the statutory demand and verifying affidavit against the current prescribed forms](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/check-the-statutory-demand-and-verifying-affidavit-against-the-current-p.md) | Red | From the demand and the affidavit verifying the debt that the lawyer has written, extract the debtor's name and ACN, the registered office, every amount in… | Read every line of your own demand against the current prescribed form and every line of your own verifying affidavit against the rule and form that govern it… |
| [Settle service evidence and the challenge period before the demand is sent](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/settle-service-evidence-and-the-challenge-period-before-the-demand-is-se.md) | Red | Extract the registered office and any external-administrator address from a company extract the lawyer has opened, into a service note.… | Open the current service and challenge-period rules before the demand leaves the office Remember time runs from service; filing alone is not enough |
| Build a first-day creditors and security-interest map | Yellow | From company records, register searches and the books, table creditors, claimed security, guarantees and related-party claims with document references. | Analyse priority under the security and the insolvency ranking rules Do not treat a generated map as proof of security |
| Build a creditor schedule from books and proofs of debt | Yellow | Reconcile ledgers, proofs and correspondence into a cited schedule. | Adjudicate proofs; AI cannot decide admissibility. |
| Draft a voidable-transaction investigation chronology | Yellow | Order bank statements and transactions by date with source references. | Determine insolvency date and defences. |
| Prepare insolvency court filings with AI-use verification | Yellow | Run a GPN-AI verification checklist over affidavits and submissions. | Verify every authority personally. |
| [Review voluminous books and records with AI in liquator litigation](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/review-voluminous-books-and-records-with-ai-in-liquator-litigation.md) | Yellow | Classify and summarise company records. | Lawyer reviews key documents. |
| [Automate collation for reports to creditors](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/automate-collation-for-reports-to-creditors.md) | Yellow | Collate data and draft report sections. | Practitioner verifies. |
| [Draft procedural correspondence to the court with AI](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/draft-procedural-correspondence-to-the-court-with-ai.md) | Green | Draft adjournment request emails. | Lawyer checks before sending. |
| [Apply the Voluntary AI Safety Standard to R&I AI deployments](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/apply-the-voluntary-ai-safety-standard-to-r-and-i-ai-deployments.md) | Yellow | Map AI use against the standard. | Lawyer confirms. |
| [Use AI e-discovery to flag areas of concern in insolvency investigations](https://ailawframework.com/practice/insolvency-restructuring-and-bankruptcy/use-ai-e-discovery-to-flag-areas-of-concern-in-insolvency-investigations.md) | Yellow | Flag relevant communications. | Lawyer reviews. |
| Summarise creditor claims into a schedule | Green | Extract creditor amounts and security. | Verify against proofs of debt. |
| Draft liquidator report sections | Yellow | Draft background narrative from the records. | Practitioner settles. |
| Analyse bank statements for voidable transactions | Yellow | Flag payments in the relation-back period. | Lawyer confirms the claims. |
| Draft the affidavit of debt in a winding-up in the Supreme Court of Western Australia | Red | Do not substitute the deponent's words. List the invoices the deponent will verify. | The affidavit stays in the deponent's own words. Amounts come from the invoices. |
| Draft the affidavit verifying a statutory demand in the Supreme Court of New South Wales | Red | Do not generate the affidavit. List the debt documents the deponent will verify. | The deponent verifies the debt. Disclose that generative AI did not generate the affidavit. Check the demand against the Corporations Act compilation. |
| Draft the affidavit in support of a winding-up application in the Supreme Court of New South Wales | Red | Do not generate the affidavit. List the demand, the debt and the company search the deponent will cover. | Take the affidavit from the deponent. Check the company details against the source search, not against a generated extract. |
| Prepare a chronology of demands and correspondence for a winding-up in the Supreme Court of New South Wales | Green | List dates of demands and letters from the file into a chronology. | Check every date against the file. If the chronology was prepared for the proceeding and is later annexed to an affidavit, paragraphs 13(b) and 15 apply to… |
| Draft written submissions for a winding-up hearing in the Supreme Court of New South Wales | Yellow | Draft submissions from the affidavits and the provisions the lawyer has opened. | Verify every citation in the body against the Corporations Act compilation or the authority. |
| Prepare a creditor chronology from the company's books for a Supreme Court of New South Wales winding-up | Green | List creditor names, amounts and dates from the books into a chronology. | Check each amount against the books. Do not attach the list to an affidavit until the affidavit rules are applied. |

## Jurisdiction notes

### Australia

#### Law

Corporations Act 2001 (Cth) Pts 5.1–5.9 and the Bankruptcy Act 1966 (Cth). Court processes have fixed deadlines; duties run to creditors, courts, ASIC and AFSA.

#### Court filings

Hallucinated citations bring costs and discipline (Murray v Victoria [2025] FCA 731: indemnity costs). Federal Court GPN-AI (16 April 2026) sets verification duties for filings and disclosure for AI-assisted evidence.

#### Figures

Errors in dividend calculations or solvency modelling cause direct creditor loss.

#### Debtor data

Putting insolvency files into unvetted AI tools breaches APP 11 and ASCR r 9 and may waive privilege.

#### Audit trail

External administrators must keep auditable, explainable decision records under the ARITA Code and the Corporations Act.

- Never let AI produce a final signed or filed court document without a lawyer checking every citation, figure and fact.
- Never let AI generate or lodge ASIC forms (505, 509, s 533 report) or AFSA lodgements on its own.
- Never use AI content for a trustee or liquidator in an AFSA or ASIC investigation without telling the regulator (ARITA Code).

Sources:

- [ASIC: Insolvency for directors](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors) (checked 2026-09-16)
- [ASIC: Liquidation, a guide for creditors](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-creditors/liquidation-a-guide-for-creditors) (checked 2026-09-16)
- [Federal Court of Australia: Winding up based on an unsatisfied statutory demand](https://www.fedcourt.gov.au/law-and-practice/guides/corporations-guides/information-sheet-1) (checked 2026-09-16)

### New Zealand

#### Corporate insolvency

Companies Act 1993 (liquidation, receivership) and the Insolvency Practitioners Regulation Act 2019.

#### Personal insolvency

Insolvency Act 2006, not the Bankruptcy Act 1966.

#### Demands and liquidation

Take statutory-demand and liquidation procedure from the Companies Act 1993 and the High Court Rules. No Part 5.3A administration or s 459E demand.

- Do not generate a statutory demand or liquidation application on an Australian form.

Sources:

- [Companies Act 1993](https://www.legislation.govt.nz/act/public/1993/105/en/latest/) (checked 2026-09-23)
- [Insolvency Act 2006](https://www.legislation.govt.nz/act/public/2006/55/en/latest/) (checked 2026-09-23)
- [Companies Register: what happens during liquidation](https://companies-register.companiesoffice.govt.nz/help-centre/when-your-company-fails/what-happens-during-liquidation/) (checked 2026-09-23)
- [Companies Office: legislation for our registers](https://www.companiesoffice.govt.nz/about-us/what-we-do/our-legislation/) (checked 2026-09-23)
- [High Court Rules 2016](https://www.legislation.govt.nz/regulation/public/2016/0225/104.0/whole.html) (checked 2026-09-23)

### United States

Local name: Bankruptcy, restructuring and insolvency

#### Governing law

The federal Bankruptcy Code in US bankruptcy courts, not Corporations Act administration or the Bankruptcy Act 1966 (Cth).

#### Court rules

Local bankruptcy rules and the judge's standing orders, including any AI certificate.

#### Citations

Rule 11 principles and Formal Opinion 512 govern generated citations in motions and briefs.

- Do not treat an Australian statutory-demand analogue as the US process. Open the Bankruptcy Code section and the local rules.

Sources:

- [Federal Rule of Civil Procedure 11](https://www.law.cornell.edu/rules/frcp/rule_11) (checked 2026-09-23)
- [ABA Formal Opinion 512, Generative Artificial Intelligence Tools (29 July 2024)](https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-512.pdf) (checked 2026-09-23)
- [Mata v. Avianca, Inc., Opinion and Order on Sanctions (S.D.N.Y. 22 June 2023)](https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2022cv01461/575368/54/) (checked 2026-09-23)

## Sources

- [ASIC: Insolvency for directors](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors) (checked 2026-09-16)
- [ASIC: Liquidation, a guide for creditors](https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-creditors/liquidation-a-guide-for-creditors) (checked 2026-09-16)
- [Federal Court of Australia: Winding up based on an unsatisfied statutory demand](https://www.fedcourt.gov.au/law-and-practice/guides/corporations-guides/information-sheet-1) (checked 2026-09-16)

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*