Bankruptcy Act – All you need to know about filing Bankruptcy in Australia

What is Bankruptcy?

Steps to declaring bankruptcy

Am I eligible for bankruptcy?

How to declare bankruptcy in Australia?

What happens when you declare bankruptcy?

How does Bankruptcy affect my employment?

What happens to my assets when I become a Bankrupt?

What Happens to my Vehicle when I become a Bankrupt?

What happens to my house when I become Bankrupt?

Is my superannuation affected when I file bankruptcy?

Who will know I’m bankrupt?

How is my credit file affected when I file Bankruptcy?

Where to find Bankruptcy Forms?

How long does bankruptcy stay on file Australia?

What is undischarged bankruptcy?

What is discharged bankruptcy?

What is Bankruptcy Register Search?

Claiming Bankruptcy Pros and Cons in Australia

The Bankruptcy Means Test: What It Is, Why It Matters

How to Go Bankrupt Without A Lawyer In Australia

How to file bankruptcy in QLD?

How to file bankruptcy in Victoria?

How to file bankruptcy in NSW?

What is Bankruptcy?

Bankruptcy is a legal process where an individual’s inability to pay debts owed as at when due is declared. In Australia, it is governed and provided by the Bankruptcy Act 1966 and is regulated by the Australian Financial Security Authority.

After all other options of paying debts are exhausted, declaring bankruptcy can be the last resort and when properly managed, it can bring about more relief from debt burden and provide an opportunity to start afresh.

Bankruptcy can be initiated in two ways. Voluntary bankruptcy is initiated by the debtor’s petition while on the other hand, a creditor can also initiate a creditor’s petition through a court process. Bankruptcy has a validity of 3 years and 1 day.

Once a bankruptcy is declared, your finances and assets are given up to an appointed trustee who manages your bankruptcy. The trustee can be nominated by you in some cases where an individual has the opportunity. The trustee takes control of the finance and asset and in turn, provide legal protection from the creditor.

Steps to declaring bankruptcy

The process of declaring bankruptcy starts with an individual providing all details of debts, assets, and income to an appointed registered trustee.

The trustee thereafter serves a notice of your bankruptcy to your creditors. This notice protects you from being contacted as regard debt owed.

Now that the trustee is in possession of your assets, some can be sold off to settle debts owed. In case the amount owed exceeds the asset value, compulsory payment will be required on your part.

Am I eligible for bankruptcy?

Eligibility for bankruptcy in Australia is determined for an individual if these two conditions apply to such

–    Having insolvent debts which are unpaid as at when due

–    Such individual is present in Australia or has a business in Australia.

No minimum or maximum debt amount applies to make anyone eligible. Applying for bankruptcy is free as there is no fee to be paid but before applying, such person must first terminate debt agreement if such exist. Your administrator needs to be contacted to sort this out first before filing for bankruptcy.

Though bankruptcy is considered the last resort after all options of debt repayment are exhausted and no satisfactory arrangement could be agreed with creditors, it is advisable to be well informed about filing for bankruptcy and be sure there is no alternative. The consequence of bankruptcy can be costly.

How to declare bankruptcy in Australia?

Like earlier mentioned, bankruptcy is the last resort option to come out of debt when every other means of repaying debts are exhausted. Now to begin, there are steps to be taken to declare bankruptcy in Australia.

There are criteria that must be met and your Trustee will require full disclosure of specific information. Working on filing for bankruptcy through a Registered Trustee has number advantages as it saves from rigors of processing and also eliminates some concern you might be faced with if you were to do it yourself.

To declare bankruptcy, you need to obtain a bankruptcy form from AFSA (the Australian Financial Security Authority). This form is to be completed and lodged with AFSA for the process of declaring bankruptcy to begin. The bankruptcy for contains document such as Debtor’s Petition, statement of Affairs and a couple of acknowledgment to be signed by you indicating that all necessary information is received by you and you understand such.

Full cooperation with your registered Trustee will make the process simple and straightforward, guaranteeing you’re getting out of bankruptcy in just three years. Complication can extend this time frame to five or eight years. Your peculiarity will be properly spelled out by your Trustee and they will need your openness to give you the best way out.

What happens when you declare bankruptcy?

Declaring bankruptcy has its benefits and drawbacks; it all depends on the peculiarity of each individual. One of the main benefits is that you are relieved from your creditors to pursue debt repayment but fines and penalties must be paid as directed by the court. Bankruptcy also does exempt from paying for child maintenance and other maintenance orders.

Secured debts such as mortgage payment must be maintained irrespective of being bankrupt. A default in payment on such mortgage can lead to repossession your home. Payment of secured loans must be maintained throughout the bankruptcy.

In the case of having a guarantor on any debt, the guarantor becomes liable for repayment of debt. This applies to joint borrowers except the guarantors of other parties of the joint borrowing have also filed for bankruptcy.

How does Bankruptcy affect my employment?

The notion that bankruptcy can affect your employment is a common source of concern for many. There could be restrictions on your employment due to bankruptcy but this depends on your type of profession and your situation. On a general note, bankruptcy does not affect your job or your employability because bankruptcy is provided for by the law and it frowns at any form of discrimination

Though bankruptcy comes with some form of restriction, it is important to know what applies to your profession or field of business. For example, a solicitor or accountant who is bankrupt cannot manage a trust account. As a business owner, you are restricted to operate only as a sole trader and you cannot be the director of a company or manage a company except if court permission is granted. Bankruptcy also bars you from holding a public position such as being a senator or Member of Parliament. You can get further clarification by contacting the Australian Securities Investment Commission (ASIC) at

What happens to my assets when I become a Bankrupt?

Your asset may be sold by your Trustee to offset your debts. Items such as tools used to earn an income, basic household items and vehicle(s) all of which must have a value up to the amount owed are left in your possession.

You are not allowed to dispose of any property in the care of trustee and your entire asset must be declared to your trustee when you file for bankruptcy. Also, bankruptcy may take your right to prosecute or take any legal action. All pending court case must be brought to the notice of your Trustee.

What Happens to my Vehicle when I become a Bankrupt?

We assume that going bankrupt with no asset is not the case here. Owning a car when bankrupt comes with its strings attached. The main party you are dealing with is your Trustee and they will request for detailed information about your vehicle and this may include the value of the car and any outstanding payment on the car.

The following factors are considered by your Trustee to determine if they will need to take possession of your car or not.

–    The value of the car must be below the amount to be paid

–    Repayment on the vehicle in the case of it being under finance

–    The vehicle is your main means of transport.

When your vehicle is claimed by your trustee, such a car is sold and the proceed is used as part of the payment of debt.

You can buy a car while bankrupt also but the value must be under the equity determined amount. If the value of the car exceeds this equity set amount, the trustee may deem it necessary to claim the car and sell. In case a car is received as a gift, trustee considers such a car as your own and the value of the car will determine if it will be claimed or not.

A car jointly owned must be purchased with your share of the equity under the set amount.

What happens to my house when I become Bankrupt?

What applies to assets applies to your house but we will take a deeper look at what happens to any house or property owned by you. Like established before, your Trustee takes control of your asset which includes your house and can decide to sell for the settlement of your debts. Your asset includes apartment, land, farm, house, all fall into this category.

Your trustee takes a look at different factors in relation to the house such as the value of the house, whether it is with a mortgage, the amount you owed to creditors and if the house is jointly owned with other co-owners.

For houses with a mortgage, it is classified as a secured debt. Defaulting on repayment can lead to loss of such property to the lender or bank. It is advisable to let creditors know about your current position so you can make the appropriate arrangement.

For a house jointly owned, your ownership share of the house becomes that of your Trustee’s and you will have no control. The co-owner will have to seek your Trustee consent and not you when a joint decision is to be made as regards the property. If peradventure the co-owner is also bankrupt, they may have the same trustee which makes the house to belong 100% to the trustee. In the event that they are different trustees, each trustee owns the share of their respective clients. The co-owner can also choose to completely buy up your share of the house and this can be done by making an offer to the trustee. The trustee is not bound to sell to the co-owner. Making a good offer can only guarantee such buy since trustee also wants to get the best deal from ant quarters, whether in the open market or from the co-owner.

In the case of no equity, which simply means that the value of the house is below the amount owed, your trustee can still go ahead to claim the house irrespective of the fact that there is no equity.

Wondering if anything will be spared when the house is taken? The first step is to ensure that all items of significant value are declared in the bankruptcy application. The trustee can decide what to sell but be assured that you will be able to keep household items we use every day.

In reality, matters in regard to houses and bankruptcy are complicated because of the peculiarity of each individual’s situation. The laws that guide each province also varies from one another though they operate the same concept.

The proper thing to do is to seek advice a licensed Insolvency Trustee to enable you to make the best decision.

Is my superannuation affected when I file bankruptcy?

Superannuation may or may not be affected and this depends on a number of factors. The first step is to inform your trustee if you have received superannuation before or after your bankruptcy commenced.

Superannuation that you received before bankruptcy is claimable by your trustee and they can go further to claim assets such funds were used to acquire.

When superannuation is received during or after bankruptcy especially when it is a lump sum, your trustee cannot claim the asset you purchased with the funds.

Only superannuation that is from a regulated fund, exempt public sector scheme or approved deposit fund is not claimable by your trustee. Your trustee can claim it if your superannuation come from anywhere apart from these. Verify from your super fund provider to know where your fund is.

Superannuation you receive during bankruptcy as income such as pension can be assessed as part of your income, and if such income is above the set amount, a compulsory payment may be required of you.

In the case of a self-managed superannuation, a person who is bankrupt cannot be allowed to be a trustee of such. You will need to notify your trustee in this regard.

Superannuation needs a careful documentation as this will serve as an evidence of the purpose of such contribution and prevent future risk such as complication that bankruptcy can present.

In summary, the following tips can be followed by everyone when operating superannuation.

–    Register only with regulated superannuation fund provider

–    Adopts a concessional and non-concessional contribution pattern of contribution especially after receiving a lump sum of money such as an inheritance.

–    Work towards maximizing your concessional contribution to guide you from grievous exposure to creditors claims. This can also come with some tax benefits

–    Endeavor to make a non-concessional contribution after tax as this will help you also to maximize your superannuation member balance for your later retirement.

Who will know I’m bankrupt?

In the case of bankruptcy, your name will be permanently registered on the National Personal Insolvency Index (NPII), a public register that can be assessed by anyone. Details of insolvency proceedings in Australia are shown by the NPII and this includes bankruptcy.

NPII also make available other details such your name, residential address, date of birth, previous name and aliases, occupation as all disclosed when you applied. The proceeding of your bankruptcy is also provided and this includes the start date and your AFSA administration number. Other details that will be made available include the name and contact of your trustee.

Undischarged bankrupt can be tracked using this portal because the current status of the proceeding is available too.

How is my credit file affected when I file Bankruptcy?

For a period of 5 years from the date you became bankrupt, a record of your bankruptcy is kept by credit reporting agencies. Also, the record is kept for another 2 years after the end of bankruptcy.

Where to find Bankruptcy Forms?

Bankruptcy forms can be obtained from AFSA. The forms contain debtor’s petition, statement of affairs and other prescribed information. Carefully fill the forms correctly and ensure no detail is left out. It is recommended that you consult a professional bankruptcy trustee for assistance and advice especially on details that may not be clear when filling your details.

How long does bankruptcy stay on  file Australia?

The standard duration for bankruptcy in Australia is 5 years and 1 day and this starts counting from the date application for bankruptcy is accepted.  This duration of bankruptcy applies also to when a creditor makes you bankrupt and duration starts counting from the day your statement of affairs is accepted.

To know when bankruptcy ends, an inquiry can be made by filling an End of bankruptcy form can be obtained from AFSA.

The duration of bankruptcy can be extended in some cases by the trustee when an objection to discharge from bankruptcy is filed in.

What is undischarged bankruptcy?

An undischarged bankruptcy is a situation in which a person who has filed for bankruptcy is yet to get court permission to stop debts payments. Though debts are discharged in the long run, some debts must be repaid before permission is given for a discharge.

An application for a discharge is not required as this is an automatic process.

What is discharged bankruptcy?

Discharged bankruptcy is a permission given by the court that lifts obligations and duties imposed on an individual as a result bankruptcy. From the point of discharge, the name of the individual on the NPII public record will show the person has been discharged bankrupt. The name on the public record will be displayed there for a total period of 5 years irrespective of been discharged bankrupt. Being discharged bankrupt does not stop you from paying fines imposed by a court, maintenance debts, student HELP debts, child support debts and student loans and debts incurred by fraud.

You can annul your bankruptcy by making an offer to your creditors and paying your debts in full. After this, you can apply to the court and you will be discharged.

A history of bankruptcy comes with consequences and one of it is the effect it will have on your ability to obtain loans. Lenders may decide to limit money you can borrow and this also applies to when buying things on credit. As a result of credit reporting agencies that keep records of your bankruptcy, your bankruptcy history can haunt you even after being discharged bankrupt.

What is Bankruptcy Register Search?

The bankruptcy Register search is also known as BRS is an online service provided by AFSA where Personal Insolvency information of individuals can be accessed from the National Personal Insolvency Index (NPII). The search can be done for a fee of $15 for a search. The output is an extract from NPII or a result report. For a search that does not match the BRS information entered, a Nil extract is produced. The output to this search can be sent to your email.

BRS serves many people and organization such as employers, potential employers, financial institution and other organization that will need to verify the state of a person insolvency. This subject to debt agreement and a personal insolvency agreement.

Claiming Bankruptcy Pros and Cons in Australia

Bankruptcy is a last resort option when it comes to clearing debts, and it is somewhat essential to have explored all other available option before settling for this arrangement. Bankruptcy is not the easy way out as it looks because attached to it are many conditions that will affect your life, and it is necessary to weigh your options. Let us consider the pros and cons of going bankrupt.


At the expiration of the bankruptcy, all debts are cleared

Freedom from creditors as it restrains them from debt collection or taking legal action against you

Bankruptcy prevents your goods to be seized as it protects essential household items such as appliances, clothes, and furniture

Your tools of trade whose value is below a certain determined threshold are protected too

Your personal injury compensation is protected same with superannuation

Your vehicle under finance if below the certain defined threshold is protected from being seized

Items of sentimental importance such as wedding rings, medals and trophies are spared

You have your income of certain threshold protected by bankruptcy

You are protected from your creditors in case they change their mind as regards debt repayment arrangement

Creditors are compelled to accept bankruptcy by the provision of law

You have the opportunity of operating a business as a sole trader.

Your record of bankruptcy is cleared from your credit history after 5 years or longer if you fail to fulfill your obligation.


Your period of bankruptcy is expected to last for three years, but it can be extended if you fail to cooperate with your trustee

Your record of bankruptcy is available to the public for a 5 year period, and this could be longer

Due to the record of your credit history, obtaining finance may be challenging especially while the bankruptcy is on

Bankruptcy does not clear non-eligible debts such as fines and penalties, car loans, mortgages, debt due to fraudulent activity, HELP/HECS debts and others in this category

National Personal Insolvency Index NPII will keep the record of bankruptcy permanently

An inheritance that might be received during bankruptcy may be traded to creditors

Non-protected property may be confiscated and sold as determined by the trustee

Travel restriction will be imposed on you by your trustee

You are restricted from practicing certain profession if you are bankrupt

You cannot hold the position of a company director when bankrupt and will require your resignation if you are already one

The Bankruptcy Means Test: What It Is, Why It Matters

The Bankruptcy Means Test is a procedure that determines if a person qualifies for bankruptcy according to the bankruptcy act. Bankruptcy means test takes into account some factors that pertain to the person claiming bankruptcy. Factors such as the income, family size, and expenses are considered to determine if a person has the disposable income that can service repayment of debts. This test is designed to limit the number of people that get their debts cleared through the bankruptcy option.

Let us take a look at how it works

The first stage is to determine what your household income looks like, whether it is below the median income for where you reside. Documents that show your income over the last six months is given to you trustee for assessment. Recent and upcoming changes are put into consideration. For example, having a job with a good income until the last two months of losing the job making the person unemployed is factored in. Same applies for some on just got a better income through a new job in less than 3 months is factored into this test.

Secondly, documents as regard expenses are given consideration. Over a period of 6 months, allowable expenses such as rent, clothing, groceries, medical cost and the likes are examined. The amount left when these expenses are deducted from the income is channeled towards debt repayment.

It is appropriate to seek legal help when compiling this list. The conflicting amount put forward as expenses can make an application such as this to be thrown out.

When Bankruptcy Means Test is passed, claiming bankruptcy is possible. Failure to pass this test means other options will be explored to settle the debts owed. Most unsecured debts such as medical bills and credit cards debts are forgiven through bankruptcy but also come with other costs.

How to Go Bankrupt Without A Lawyer In Australia

This article is in no way discrediting the need for professional advice when filing for bankruptcy but aimed at giving detailed information on what to consider and steps to be taken when considering it. Bankruptcy is meant to be the last resort when it comes to inability to clear debts. It is recommended that you weigh your options before settling for bankruptcy as it is not really an easy way out but has its own consequences.

4 Steps to Go Bankrupt

1.Weighing all Available option

Like earlier stated, bankruptcy should not be considered as the easy way out of debt, and if you settle for this option, it is advisable not to take the process lightly. Others payment arrangement should be proposed to your creditors and explore all possible ways to resolve issues as regards debt owed. A Debt Agreement or Personal Insolvency Agreement can be explored first, but if these options do not work, you can now consider bankruptcy as a last option.

2.Eligibility Test

Some criteria qualify a person for bankruptcy. The first of such is that such an individual must be present in Australia and must be insolvent as at the time of filing for bankruptcy. The Authority body that determines if a person is genuinely insolvent is AFSA. AFSA takes a look at the ability of the applicant to pay back debts within a time range and also review the address. In a situation where the address given is not an Australian address, the applicant is asked to return to Australian before filing for Bankruptcy.

3.Professional Advise

It is essential to get the help of a registered bankruptcy trustee before taking the final step of filing for bankruptcy. Bankruptcy has its trapping and pitfalls, and the best way to avoid such is by consulting an expert in this regard. It is also necessary to be open with your trustee, disclosing all details of your current situation without hiding any aspect. Do not hide assets or make a false declaration as it could backfire leading to an extension of your bankruptcy period. Instead of a three-year term, bankruptcy can be extended to 8 years if things go wrong. Truthful disclosure to your trustee will also help your trustee to give reasonable assistance on the best way out.

4.Complete and submit your Bankruptcy Forms

Bankruptcy forms consist of debtor’s petition, a statement of affairs and prescribed information which are obtained through AFSA. You need to fill all necessary information required in the forms and get them submitted back to AFSA. Endeavor to ensure that there is no mistake on the forms which should be carefully filled. Your trustee can also be of assistance to clear any issue that might be unclear. Once submitted and your submission is acknowledged, your bankruptcy begins to count. Ensure you adhere to all terms attached to be able to get out of bankruptcy at the proper time to prevent an extension.

How to file bankruptcy in QLD?

Filing for bankruptcy in QLD is what is obtained in every other part of Australia. Following the procedures laid by AFSA guarantee an individual or company to file for Bankruptcy. Let us take a look at what bankruptcy means and how it applies to different individuals, organizations, and situations.


This is what precede insolvency and can be described as the inability of a person or business to pay its debts. Insolvency can leads to the eventual closing down of a business and has different procedures for individuals and businesses.

Personal insolvency

Personal insolvency applies to individuals or partners in which three formal options are made provision for according to the Bankruptcy Act 1966 if an individual is unable to pay debts. The three options for resolving unmanageable debt are

–    Voluntary Bankruptcy

–    Debt agreement

–    Personal Insolvency Agreement

Each of these options has its conditions and terms attached to it. For example, bankruptcy comes with consequences that must be carefully thought out before going for the option. Restriction to overseas travel, access to loan and ability to do certain job/ position are some of the consequences.

Company Insolvency

Just as it applies to an individual, this time insolvency is the inability of a company to pay its debts, and this leads to liquidation of such company. The orderly winding up of a company by stopping of all sales and operation after which all assets are sold to offset debts owed and distributing any surplus that might be left among shareholders is called Liquidation.

Liquidation is in three forms

Members’ voluntary liquidation

Court liquidation

Creditors’ voluntary liquidation

Managing debt

To avoid insolvency, it is of importance to identify financial distress early enough to save one’s finances or that of a company from total collapse. There are experts and professional that can be of financial and legal help in this situation of debt management.

Australian Competition and Consumer Commission’s (ACCC’s) guide is a good recommendation that can be of help too.


How to file bankruptcy in Victoria?

Filing for bankruptcy in Victoria is made easy just like anywhere in Australia. AFSA is the body mandated to administer bankruptcy through registered Trustee.

The first step here is to check your eligibility. This means that you are insolvent and need to file for bankruptcy. AFSA review your application and your address to ensure that you truly qualify for bankruptcy.

You can get professional advice from a registered Trustee to ensure that you follow the best route in managing your debt as bankruptcy may not be the best option for you but should be the option of last resort.

When you have concluded that bankruptcy is the way to go having adequately consulted your trustee, the next step is to approach AFSA for Bankruptcy forms. Fill the forms correctly and get them submitted back to AFSA.

Your bankruptcy begins when AFSA acknowledge the receipt of your application.

How to file bankruptcy in NSW?

Filing for bankruptcy in NSW is according to the provision of the Australian Bankruptcy Act. Saddled with the oversight function is AFSA. Individuals and companies that are insolvent are required to follow provision made for debt management using any of the three options available.

  • Debt agreement
  • Personal Insolvency Agreement
  • Voluntary Bankruptcy

It is important to seek financial or legal advice from a qualified and registered professional in this regard to choose the best option. Filing for Bankruptcy should be considered the option of last resort having exhausted all other means of getting the debt paid.

Bankruptcy should not be taken with kid’s gloves as it has its trappings that must be avoided. Truthfulness is also required on the part of the individual primarily when consulting a trustee. Hiding assets or not declaring some can have an adverse effect later in future. This can lead to the extension of bankruptcy period from 3 years to as much as eight years.

If all terms are adhered to strictly, bankruptcy can be a smooth ride and gives the opportunity for individuals to bounce back.