Bankruptcy

​What is​​​​ b​ankruptcy?

Bankruptcy is a legal process where you cannot pay your debts and you give up your assets and control of your finances, in exchange for being released from most of your debts. You can either become bankrupt voluntarily or you can be made bankrupt by a creditor. Bankruptcy usually lasts for three years and one day.

Bankruptcy is usually something you do as a last resort because it has serious consequences. In some circumstances there may be alternative options for you to consider.

If you are considering bankruptcy, you should speak to a financial counsellor and a lawyer about your situation.

For more information, see:

• Bankruptcy: Overview on the Federal Circuit and Family Court of Australia website, and

• Bankruptcy Guide – An Introduction on the Federal Court of Australia website.
  

Should I go​ b​​ankrupt?

Going bankrupt is a big decision that can have serious consequences for you. Although it can release you from paying most debts, a trustee will be appointed to control your finances and income and can decide to sell some of your assets.

You may need to make payments towards your debts if your income is over a set amount.

The bankruptcy will be listed on your credit report and the National Personal Insolvency Index (NPII), a public register that can be accessed by anyone for a fee.

For more information, see National Personal Insolvency Index (NPII) on the Australian Financial Security Authority website.

You will also have certain legal obligations and restrictions placed on you, for example, telling your trustee about any income you receive, and restrictions on travelling overseas.

If you are considering bankruptcy, you should speak to a financial counsellor and a lawyer about your situation.

What is financial​​ cou​nselling?

A financial counsellor can help you assess your financial position and work out what you can do to manage your debts. They can:

• advocate for you in some circumstances, for example, by negotiating with your bank or creditors for payment arrangements
• help arrange instalment plans
• identify other appropriate options, for example, hardship programs for electricity, gas and water suppliers
• talk to you about options instead of going bankrupt
• discuss whether bankruptcy is the best option in your circumstances.

​Where can I find a​​ financial counsellor? ​

You can speak to a financial counsellor fo​​​r free, usually in your local area or over the telephone.

For more information, see Find a Financial Counsellor on the National Debt Helpline website.

What other options​​​ ar​e there?

You should speak to a financial counsellor about your options. Bankruptcy is usually something you do as a last resort, and in some circumstances there may be alternative options for you to consider, for example:

• asking for a variation of your contract for consumer credit debts such as your home loan, personal loan or credit card debts
• negotiating payment arrangements with your creditors

a Part IX debt agreement or personal insolvency agreement (but you should speak to a Financial Counsellor and/or get some advice before proposing this type of arrangement). 

For more information, see I can’t pay my debts on the Australian Financial Security Authority website.

What is a temporary debt protection?

A Temporary Debt Protection (TDP) gives you a 21 day protection period from being pursued by unsecured creditors, while you seek help and decide how to proceed. 

A TDP is an act of bankruptcy, and your application can be used by creditors against you to make you bankrupt.

During the 21 days, your unsecured creditors cannot take enforcement action to recover money you owe them. This means they can't:

• garnish your wages
• have the sheriff seize your goods.

However, they may still: 

• seize your property such as your home under mortgage
• take other legal action against you including progressing the next steps in enforcement proceedings
• enforce other debts not covered, such as child support, HELP debts and fines imposed by a court.

A TDP is not listed on the National Personal Insolvency Index (NPII).

For more information, see What is a temporary debt protection (TDP)? on the AFSA website.

What is a debt ​​agree​ment?

A debt agreement, otherwise known as a Part IX debt agreement, is an act of bankruptcy and is a legally binding agreement between a debtor and their creditor(s). The agreement sets out how much money the debtor will pay the creditor(s) and stops the creditor from taking any legal action to recover the debt(s). 

You must agree to make regular repayments for an agreed period of time. From June 2019, debt agreements can't be for longer than 3 years, or 5 years if you own or are paying off your home.

There are strict eligibility requirements for debt agreements, including an income, assets and debt threshold. Debt agreements must also be approved by the Australian Financial Security Authority (AFSA) and then sent to creditors to vote on.

A debt agreement will appear on your credit report and be listed on the National Personal Insolvency Index (NPII).

You will have to pay fees to the organisation or person that administers the debt agreement.

Proposing or entering into a debt agreement can have serious consequences for you. You should speak to a financial counsellor and get independent legal advice before considering a debt agreement.

For more information, see:

• Debt Agreements on the Financial Rights Legal Centre website
  
• What is a debt agreement? on the AFSA website. 
  

What is a personal ​​​insolve​ncy agreement?

A personal insolvency agreement (otherwise known as a Part X) is an act of bankruptcy and it is a legally binding agreement between a debtor and creditor(s) that sets how much money the debtor will pay the creditor(s) to satisfy a debt. It is different to a debt agreement as there are fewer eligibility requirements and restrictions. The agreement must be agreed to by a majority of creditors when it is voted on.

A debt agreement will appear on your credit report and be listed on the National Personal Insolvency Index (NPII).

Proposing or entering into a personal insolvency agreement can have serious consequences. You should speak to a financial counsellor and get legal advice before considering a debt agreement.

For more information, see What is a PIA? on the Australian Financial Security Authority website. 

How much debt​​​​ do I have ​to have to apply for bankruptcy?

There is no minimum amount of debt that you must have to voluntarily apply for bankruptcy.

When can​​ a creditor make me​ bankrupt?

A creditor can apply for you to be made bankrupt if they are owed at least $10,000 (as at 1 July 2024) and you have committed an act of bankruptcy, for example, failing to respond to a bankruptcy notice, proposing a debt agreement or a debtor's petition.

A bankruptcy notice is a formal notice for you to pay the debt within a period of time, usually 21 days. The creditor will arrange for it to be served on you. If you do not pay or get the bankruptcy notice set aside, the creditor can apply to the Federal Court of Australia or Federal Circuit and Family Court of Australia for a sequestration order, an order that declares you bankrupt.

Am I eligible to appl​​​y for bankruptcy?

You are generally eligible to apply for bankruptcy if you:

• reside in Australia, or
• have a home or business in Australia.

How do I apply to be​​​ bankrupt?

Before applying for bankruptcy, you should consider:

• financial counselling, and any alternatives to bankruptcy in your financial situation
• whether you are eligible to apply for bankruptcy.

If you are considering bankruptcy, you should speak to a financial counsellor and a lawyer about your situation, as going bankrupt can have serious consequences.

If you have made the decision to apply for bankruptcy, you need to file a debtor's petition and statement of affairs with the Australian Financial Security Authority (AFSA) within 28 days of signing the forms. You can do this:

• online, or 
• by post.
  

You will also need to provide proof of your identity.

If you want a trustee of your choice appointed, you also need to apply for this on a separate form.

For more information and to download the forms, see Apply for bankruptcy on the AFSA website. 

What is a debtor's​​ petition?

A debtor's petition is the form you use to voluntarily apply to be made bankrupt. The petition is filed with the Australian Financial Security Authority.

If you need help filling out this form, you can contact the National Debt Helpline.

What is a statement ​​of a​​ffairs?

A statement of affairs is a form attached at the back of a debtor's petition where you fill out information about your debts, income and assets.

If you need help filling out this form, you can contact the National Debt Helpline.

What is​ a​ ​trustee?

A trustee is a person or body corporate that is appointed to manage a bankrupt person's finances. They are registered with the Australian Financial Security Authority.

Who ​​​will be appointed as ​my trustee?

When you apply to be made bankrupt, the Australian Financial Security Authority (AFSA) can appoint a trustee for you. This may be a private trustee or it may be the Official Trustee, which is AFSA.

Alternatively, if you want a trustee of your choice, you can ask the trustee to complete a Trustee consent to act declaration form. This form must be filed at the time you file your debtor's petition and statement of affairs. 

Who can help​​ me ap​ply?

You should speak to a financial counsellor and a lawyer if you need help applying for bankruptcy.

Beware of agencies charging fees to help you with a bankruptcy application. You can get free independent advice from an accredited financial counsellor by calling the National Debt Helpline.

Do I have to pay a​ fee to apply for bankruptcy?

You do not have to pay a fee to apply for bankruptcy. For more information, see the Apply for bankruptcy on the Australian Financial Security Authority website.

What happens after I file a ​debtor's petition?

After you file the necessary forms with the Australian Financial Security Authority, they will consider your information and decide whether to grant your bankruptcy. In some circumstances, the Official Receiver for bankruptcy can reject your application.

If your bankruptcy is approved, you will become bankrupt straight away. Your creditors will be notified that you have been made bankrupt. The trustee appointed to you will also investigate your financial affairs to decide how to best manage your assets and income.

During your bankruptcy, you have certain legal obligations and restrictions.

When can my ​​application ​for bankruptcy be rejected?

The Australian Financial Security Authority (AFSA) can reject your petition to become bankrupt if:

• you have given false or misleading information
• you have not provided proof of identity
• they believe you can pay your debts within a reasonable time and you have either:
  • been bankrupt three or more times, and once within the last five years
  • been unwilling to pay one or more of your creditors.
    

What if my application ​​is r​ejected?

If your petition to be made bankrupt is rejected by the Australian Financial Security Authority (AFSA) you can request a review of the decision with AFSA. 

If you are not satisfied with the outcome of the review, you can appeal some decisions to the Administrative Appeals Tribunal (AAT).

For more information, see Can I appeal? on the AFSA website.

Before filing an application for a review with the AAT, you should get legal advice.

​​​​What is a bankru​​ptcy ​not​ice?

A bankruptcy notice is a formal demand for you to pay a debt within a specified time, usually 21 days. A creditor can apply for this notice to be issued to you if:

• a judgment debt has been made against you for at least $10,000, or
  
• two or more judgment debts have been made against you that together total at least $10,000, and
• the judgment is less than six years old.

Getting a bankruptcy notice indicates that the creditor is starting a process against you to make you bankrupt. If you have received a bankruptcy notice, you should get legal advice.

Can a bankruptcy notice be served by email?

Yes, bankruptcy notices can be served by:

• personal delivery
• post
• courier
• email.

What should I do i​​f I re​ceive a bankruptcy notice?

If you receive a bankruptcy notice you can:

• pay the amount specified in the notice within 21 days of being served with the notice
  
• come to an arrangement with the creditor about the debt within 21 days of being served with the notice
  
• apply for the notice to be set aside in certain circumstances.

If you do not pay the amount specified in the notice within 21 days, you will be committing an act of bankruptcy and this allows the creditor to petition the Federal Court of Australia or Federal Circuit and Family Court of Australia for a sequestration order, an order to make you bankrupt.

If you have received a bankruptcy notice, you should get legal advice.

Can I get the bankruptcy​​ noti​ce set aside?

In some circumstances you may be able to get the bankruptcy notice set aside, for example, if:

• there is a defect in the notice, for example, the requirements for the notice under the legislation are not followed
  
• the debt does not exist, for example, if the amount of the judgment was paid in full or you are applying for the judgment to be set aside
  
• you have a cross claim against the creditor for the same amount of the judgment or a greater amount.

You should get legal advice if you want to set aside the bankruptcy notice. If your application is unsuccessful you may be ordered to pay the creditor's legal costs.

For more information, see Applications in a bankruptcy on the Federal Circuit and Family Court of Australia website.

What is a creditor's​ ​petition?     

A creditor's petition is an application by a creditor to the Federal Court of Australia or Federal Circuit and Family Court of Australia for a sequestration order to be made against you to make you bankrupt.

A creditor can only make this petition to the court if:

• you have not paid the amount of the debt specified within the required time on your bankruptcy notice, which is called an act of bankruptcy, and
• the petition is filed within six months of the date of the act of bankruptcy.

The petition will set out the date, time and location for a hearing for the court to determine whether to make a sequestration order against you.

If you have been served with a creditor's petition, you should get legal advice.

For more information, see Applications in a bankruptcy on the Federal Circuit and Family Court of Australia website.

What happens at t​he​​ hearing?

At the hearing, the Court will hear the creditor's case and any submissions you want to make.

If the Court is satisfied that you have not paid the creditor as specified in the bankruptcy notice, the Court will make a sequestration order against you. This is an order that makes you bankrupt. If this happens you will have a trustee appointed to manage your financial affairs.

You should get legal advice about how to prepare for the hearing, and what to include in your submissions.

Can I dispute a credito​r's​​ petition?

You may be able to dispute the creditor's petition to make you bankrupt if:

• you were never served with a bankruptcy notice (although you would need evidence of this and something more than just saying you didn't receive it)
• you paid the amount specified in the bankruptcy notice within 21 days of being served with the notice
• you came to an agreement with the creditor about how to pay the amount in the bankruptcy notice, for example, by instalments, and this agreement was reached within 21 days of you being served with the notice
  
• you are solvent, meaning that you can pay your debts. You will need to provide evidence of your ability to pay all your debts.
  
• you do not owe the money claimed by the creditor. In most cases you can only dispute a creditor's petition for this reason if the judgment debt was a default judgment. You will also need to show the Court that you have a good defence to the judgment debt.

Disputing a creditor's petition can be a complex process, and you may be ordered to pay the creditor's legal costs if you are unsuccessful with your case.

If you believe you have grounds to dispute a creditor's petition, you should get legal advice.

For more information, see Bankruptcy: Opposing an application on the Federal Circuit and Family Court of Australia website.

​What will happen if I am​​ made bank​rupt?

When you are made bankrupt, a trustee is appointed to deal with your financial affairs. Your trustee may:

• manage or sell your property and assets
• recover any income you earn over a certain limit
• investigate your financial affairs, for example, if property has been transferred into another person's name.

If you are made bankrupt, restrictions and obligations will be placed on you, for example, you: 

• will need to provide your trustee with any information they request
• will need to disclose to your trustee if you receive any more income, for example, if you win money, or get a payout
• will need to disclose any new assets you get after the date of bankruptcy
• get written permission before travelling overseas and surrender your passport if your trustee asks you for it
  
• can't take on certain roles, for example, administering financial accounts as a solicitor or accountant, or act as the director or manager of a company, unless you have permission.

For more information, see Currently bankrupt on the Australian Financial Security Authority website. 

If you are considering bankruptcy, you should speak to a financial counsellor and a lawyer.

What happens to​​ my asse​ts?

When you are made bankrupt, a trustee is appointed to deal with your financial affairs.

Your trustee can sell any assets of value that you have to pay your creditors, including:

• any houses or property you have, if you have equity in the property
  
• your motor vehicle, unless it is valued at less than the threshold amount
• your tools, unless they are tools used to earn income valued less than the threshold amount
  
• cash
• shares and investments
• other assets of value.

For details of the threshold amounts, see Indexed amounts on the Australian Financial Security Authority website.

What a​ssets can​ I keep?

There are certain things that your trustee can't sell, including:

• your motor vehicle if it is valued at less than the threshold amount
  
• tools you use to earn income (tools of trade) that are valued at less than the threshold amount
  
• household items, for example, your bed and fridge
• most forms of superannuation
• some forms of life insurance payments, and compensation for personal injuries
• money you hold in trust for someone else.

For more information, see Indexed amounts and What happens to my money? on the Australian Financial Security Authority website.

What can happe​n to​​ my home?

If you own your home or have a mortgage on it, your trustee will find out:

• how much your home is worth
• what mortgages you have on your home, and how much you owe if there are any co-owners for the property.

Your trustee will decide whether they need to sell your home so that the proceeds from the sale can be used to pay debts you owe to your creditors. There are rules about how your trustee does this, particularly if the property is jointly owned.

For more information, see What happens to my house? on the Australian Financial Security Authority website. 

What if the house​​ is join​tly owned?

If you and your partner both are listed on the title to your home, and your partner is not bankrupt, your trustee is only appointed to deal with your share. This might be a half share of the property if you are joint tenants, or another share if you are listed as tenants in common on the title. Your trustee can:

• sell your share to your partner, if your partner submits a reasonable offer to buy it. Your trustee is under no legal obligation to sell to your partner, so usually they will only consider reasonable offers based on market value.
  
• sell your share in the property. If you and your partner are joint tenants they will need to first obtain permission from your partner. If your partner refuses to sell, your trustee may apply for a court order to sell the property. Once the house is sold and the sale costs are paid, the trustee will divide any sale proceeds with your partner based on their share of ownership. 
  

For more information, see What happens to my house? on the Australian Financial Security Authority website. 

What happens to the pr​​​oceeds of sale if the house is sold?

If the property is sold, the proceeds from the sale will be used to pay:

• the mortgage first, and 
• sale costs. 

Any leftover money is then divided between the co-owner of the property and your trustee. Your trustee can use the portion they get from the sale to pay the debts you owe your creditors.

If the sale proceeds do not cover the mortgage, your legal responsibility for the remaining debt will be managed by your trustee. Any co-owner can also be held legally responsible for the shortfall amount.

For more information, see What happens to my house? on the Australian Financial Security Authority website. 

What if my partner is made b​ankrupt and our jointly owned property is sold?​

If the property is sold, the sales proceeds may be used to pay:

• the mortgage first, and
• sale costs.

Any leftover money is then divided between you and the trustee (on behalf of the bankrupt person). How these shares are distributed will be based on how ownership is divided, for example:

• if it is owned in equal shares, then the sale proceeds will be divided equally
• if it is owned in varying shares, for example, 30% and 70%, the sale proceeds will be divided based on these percentages.

If there is a shortfall on the loan, meaning that the sale proceeds do not cover the mortgage, you can still be held legally responsible for the shortfall amount. 

If your partner is bankrupt and their trustee is trying to sell your property, you should get legal advice.

What if my partner is mad​​e ​bankrupt but I'm not on the title to the property?

You should get legal advice about your circumstances. You may need to provide evidence to the trustee that you have an interest in the property.

What happens to my inco​me ​​if I am made bankrupt?

There is no limit to how much income you can earn while you are bankrupt. However, if you earn above a certain threshold amount of income you will usually have to pay contributions from your income to your trustee.

You also have an obligation to keep your trustee informed about any changes in your income or employment.

For more information, see Income and employment on the Australian Financial Security Authority website.  

Will bankruptcy release me​ ​from all of my debts?

If you are made bankrupt, you will be released from paying most debts as long as they are included in your bankruptcy. There are some exceptions, such as:

• penalties and fines imposed by a court
• certain child support debts, for example, a debt owed to the Child Support Agency
• unliquidated claims, for example, a claim for property damage for a car accident that occurred before the bankruptcy but where the amount of the claim has not been resolved
• HECS or HELP debts
• any debts you have incurred after your bankruptcy started.

These types of debts must still be paid during your bankruptcy and after your bankruptcy has ended.

For more information, see What happens to my debts? on the Australian Financial Security Authority website. 

Will I have to pay a restitu​tion debt if I am bankrupt?

If you are already bankrupt and you have received an Order for Restitution, you should contact your Trustee immediately.

If you are in financial hardship and thinking about applying for bankruptcy, you should get legal advice. 

Will I have to pay my fines if​​ ​I go bankrupt?

In some circumstances you may be released from paying fines at the end of a bankruptcy if the fines are declared before you go bankrupt and are not court fines or penalties.

During your bankruptcy, you might need to still pay some money towards any fines being managed by Revenue NSW. If you do not, Revenue NSW can suspend your driver licence or vehicle registration if you have unpaid overdue fines.

There may be alternatives for you to deal with your fines such as a write-off, or a Work and Development Order. You should get legal advice or speak to your trustee if you are concerned about this.

Can I travel ​​overse​as?

If you are bankrupt, you usually have to get your trustee's permission in writing to travel overseas. In some circumstances, your trustee can also impose conditions on your travel overseas or ask you to give them your passport. You have a legal obligation to comply with any conditions, and to provide your passport to your trustee if they request it.

If you travel overseas without your trustee's permission, you may be committing a criminal offence.

For more information, see Can I travel overseas during bankruptcy? on the Australian Financial Security Authority's website.

Can bankruptc​y affect my ​​employment?

Some professional associations and industries may require you to disclose if you are bankrupt. You should check your employment obligations and get advice if you are not sure.

There are also some roles you cannot undertake, for example:

• being a director/manager of a company, unless you get permission
  
• managing financial or trust accounts as a solicitor or accountant.

If you earn a certain amount of income during your bankruptcy, you may also have to pay an income contribution to your trustee.

For more information, see Employment restrictions on the Australian Financial Security Authority website.

Will bankruptcy affect​ my​​ ability to take out future finance?

Bankruptcy may affect your ability to borrow money, or obtain insurance, usually because the provider will check your credit report. Being bankrupt may also impact on your ability to enter other contracts, for example, to enter a phone contract or hire purchase arrangement for goods.

Some providers target people who have trouble getting finance, and they offer loans that usually attract higher interest and/or fees. You should always get legal or financial advice before entering these types of arrangements.

For more information, see What happens after my bankruptcy ends on the Australian Financial Security Authority website. 

Does bankruptcy go on​​ ​​my credit report?

A bankruptcy is recorded on:

• your credit report for five years from the date of the bankruptcy, or two years from the date the bankruptcy ends, whichever is longer
  
• the National Personal Insolvency Index (NPII) permanently.

Other types of information are also recorded on your credit report, for example, court judgments. 

For more information, see Your credit report on the Financial Rights Legal Centre website.

Can I hide my details on the National Personal Insolvency Index?

If you believe that publishing your personal information (such as your home address) on the NPII would put your safety at risk, you can make an application to AFSA for the Inspector-General to consider suppressing your personal details.

Your name and date of birth will not be able to be suppressed.

For more information, see Request for information to not be on the NPII on the AFSA website 

​​​When does bankru​ptcy​​ en​d?

Bankruptcy will end after three years and one day from when:

• your Statement of Affairs is accepted by the Australian Financial Security Authority (AFSA), or
• the date the Statement of Affairs was filed for an involuntary bankruptcy. 

Bankruptcy can be extended to five or eight years, but this usually only occurs in limited circumstances.

You can apply to annul your bankruptcy earlier than three years if you pay all your debts in full. 

For more information, see How do I annul my bankruptcy? on the AFSA website.

Do I have to apply for​​ it to end?

A bankruptcy will automatically end after three years and one day. You do not need to apply for this to happen.

If you want confirmation, you can ask your trustee to provide you with confirmation that the National Personal Insolvency Index (NPII) shows that your bankruptcy has been discharged (ended). You can also access this information yourself for a fee.

For more information, see I need confirmation my bankruptcy has ended on the Australian Financial Security Authority website.