What is Bankruptcy for?


Bankruptcy is a legal process which allows you to declare that you’re unable to pay your debts. It can release you from most debts, provides you with financial relief and you get to make a fresh start.


You can enter into voluntary bankruptcy, however prior to this you should seek advice on how bankruptcy will affect your current situation.


Bankruptcy normally lasts for 3 years & 1 day


What’s a Bankruptcy Trustee?


There are 2 types of trustees, 1 that’s appointed by AFSA and you can also nominate a registered trustee of your choice. Both are designed to manage your bankruptcy and make sure you adhere to your obligations.


Which one you choose will be determined on your situation. We will assist with this at your review stage.


Before entering bankruptcy…

The single most important thing to do when considering things is to seek professional advice. If you have spoken to a person and they have recommended something, make sure they have gone through all options such as Personal Insolvency Agreement, Debt Agreement & Bankruptcy and applied all 3 to your situation prior to provide the recommendation.
It’s a big decision, make sure you a making the right one.
Speak to one of our advisors between 7am – 7pm 7 days a week on 1300 712 466
Or see if bankruptcy could be an option for you by completing our bankruptcy score card

What’s the difference between a Part IX debt agreement, Personal Insolvency Agreement & Bankruptcy?

You need to know about all three so you can make the best decisions for you and your family.
All 3 are part of the Bankruptcy ACT – all 3 will have different pro’s and con’s.

Personal Insolvency Agreement

Think of this as like a reduced payment option. It is an agreement between you and your creditors. You have to use the services of a registered trustee who will administer just how much you need to pay out. Most people looking at bankruptcy this isn’t suitable as it requires you to have access to lump sum of money to meet the conditions. Or if it’s not a lump pay out it could take years to settle the debt through an agreeable payment option.

What’s the process of Bankruptcy?

In the most simple terms bankruptcy is a process where people who cannot pay their debts give up their assets and control of their finances, either by agreement or court order, in exchange for protection from legal action by their creditors.
The process has 10 main steps:
1. Determine your eligibility for bankruptcy
2. Determine that bankruptcy is your best option (most important step)
3. Receive pre-insolvency advice to ensure you understand what’s involved
4. Complete and obtain necessary information (personal & financial)
5. Complete statement of affairs
6. Complete debtors petition
7. Set up AFSA account
8. Complete required paperwork and submit
9. Receive any rejected applications and ermedy the reject reason and relodge
10. Receive bankruptcy number and assigned a trustee

Will I lose my house in bankruptcy?

The general rule is that you can’t keep an asset like a house when bankrupt. However there are options to keep your house in your family.
The process to keep your house can be more complicated and it will depend on a few factors such as your current ownership, who the other owner / s are and the amount of equity available in the property.
There could be the option for you however it’s not a blanket rule so giving us a call is best to discuss your situation – 1300 712 466

What happens to my car during bankruptcy?

In most cases yes, however you need to be aware that there are some requirements based on the value / equity you can have in the vehicle.
You can have equity available in your car up to $8,000
Check out the full client scenarios here for more detail or send us an enquiry and we can help

What debts are included in Bankruptcy?

Debts are placed into 2 categories
-Unsecured Loans
-Secured Loans
Basically anything that hasn’t got an asset attached to the debt will be an unsecured loan.
Unsecured Debts

Bankrutpcy covers most unsecur ed debts, such as:

-Credit & Store cards
-Unsecured personal loans
-Gas, electricity, phone and internet
-Overdrawn accounts and unpaid rent
-Medical, legal and accounting fees

You will need to confirm if bankruptcy covers the following:

-Centrelink debts
-ATO debts
-Victims of crime debts
-Toll fines

Bankruptcy doesn’t cover the following debts

-Court imposed penalties and fines
-Child support
-HECS / HELP debts
-Debts you incur after bankruptcy
-Unliquidated debts

Secured Debts
A secured debt is tied to an asset, such as a house or car. The creditor has the right to take possession of your property if you don’t make the payments.
Some examples are:
-Mortgage (house is security)
-Car Loan (car is security)
-Hire purchase or rent to buy (furniture / electronics are security)
Joint Debts:
A joint debt is just a normal debt that you share with another party. One thing to note is that if one party declares bankrupt, the other person on the loan documents becomes 100% liable for the debt
Call us now for a free bankruptcy check or complete the bankruptcy scorecard here.

How long does bankruptcy last?

Your bankruptcy period will last for 3 years & 1 day. However it will be placed on your credit file for 5 years. Once you’re discharged, you will have a discharged bankruptcy on your credit file for an additional 2 years – so it will be hard to get any new loans for the 3 year bankruptcy period – once you’re discharged you’re welcome to apply for credit up to any amount.

How much can I earn during bankruptcy?

When you become bankrupt, it doesn’t prevent you from working. There could be certain jobs / professions that you might not be able to operate in. This is why good advice is an important part of the process.
One of your obligations during bankruptcy is to keep your trustee informed of any changes in income or employment.
The main 3 changes that you would have include:
-Job changes
-Receiving a higher or lower income (including govt assistance)

How much can you earn during bankruptcy?


There’s no limit placed on an individual relating to earning an income while you’re bankrupt. There also is no limit to the amount you can save during your bankruptcy. However, if your after – tax income exceeds the set threshold, you will have to make compulsory payments. This amount changes with how many dependents you have.



You must be aware that these threshold figures are “net” income. So if your trustee determines you are earning over the income set amount, they’ll ask you to pay income contributions. Contributions is just the word that’s often used for compulsory payments from your income.


Compulsory income payments are:


-50% of the amount you earn above the income threshold (set amount)
-Paid by you to the trustee
-Calculated by your trustee based on the thresholds

Can a bankrupt travel overseas

You can travel overseas, however you need to be aware that part of your requirements under bankruptcy is that you apply to go overseas – so before you go you must complete an overseas application form which will be approved by the trustee. Also, it costs $150 to process the application.

Can a bankrupt person be a director of a company?

No you cannot. Once you’ve been declared bankrupt you will be removed from any office holding positions. You cannot manage nor run a company whilst you are bankrupt without the specific approval of the official trustee.

Can a bankrupt run a business

Yes you can – however you will need to run this business in your own name as a sole trader through your ABN. After your bankruptcy is discharged you can then restructure back into a company.

Will I lose my pension if I go bankrupt?

No you will not, your pension will not be affected by bankruptcy

How will bankruptcy affect superannuation?


Superannuation is protected from the trustee under the bankruptcy law. However, there is one situation that it’s not cover.


If a person has transferred a high sum of money into their superannuation to hide these funds from the creditors. Then the trustee can remove the funds from your super to pay creditors. However under any other circumstances they cannot touch your superannuation.

Can I have an ABN during bankruptcy?

Yes, absolutely you can. Many clients who were previously running a company switched to running the business as a sole trader. This is because for the 3 year bankruptcy period you cannot be a director of a company or manage a company.
You can restructure back into a company once you are discharged.

How much does it cost to go bankrupt?


Declaring bankruptcy can be relatively inexpensive. If you want someone like The Bankruptcy Team to look after the entire process and hold your hand we can do that. Our pricing starts at $750.00.

Many people we come across spend thousands in interest repayments trying to keep up with the demands of the debt, only to realise that it's not sustainable for them. This may or may not be you, if you're unsure you can call us cost free on 1300 712 466

Will anyone come to my home?

No we will make sure that any debt collection will cease as soon as we finalise the bankruptcy.

Do I need to attend court if I declare bankruptcy?


Absolutely not. That's a false assumption that you need to attend court. 

The Federal Court system only handles bankruptcy if a creditor is applying for someone to be made bankrupt. 

If you are filing a voluntary bankruptcy then the simple answer is no - you do not have to attend court.

Can I keep an inheritance if I file for bankruptcy?


The short answer is no the trustee will be able to take and use to pay creditors. However should this be a concern legal advice is always the best option.

Can I buy shares and make investments while bankrupt?


No you cannot – whilst it’s fine for you to save as much of your after tax income as you’d like - if you buy any investments, which include shares the trustee will be able to sell these shares to payback creditors.


Another thing to be careful of is if you have cash, leave it in a standard account. Do not put it in a term deposit as this will change the purpose of the funds and then be counted as an investment, the trustee would be allowed to take this money in that instance.