An individual facing personal insolvency can enter bankruptcy in either of two ways:

  • Voluntarily, by executing a debtor's petition, or
  • Involuntarily, by being forced into bankruptcy by a creditor, pursuant to a Sequestration Order made by the Court

The individual is usually unable to to pay his or her debts and is left with no alternative. 

Bankruptcy has several purposes:

  • To discharge the individual from common debts like credit card debts and tax debts.
  • To relieve the individual of financial distress by stopping creditors pursuing the individual.
  • To publicly bring to account by way of investigation and reporting the individual's assets and affairs. 
  • To recover, realise and distribute any assets of the individual's estate to its creditors.

If you are facing bankruptcy consider a confidential and obligation-free discussion with one of our experienced Bankruptcy Specialists regarding your situation.

Bankruptcy, Personal Insolvency Agreement or Debt Agreement? 

Which is best for your circumstances?

Debt Agreement
Personal Insolvency Agreement
Australian Connection
Must have a residential or business connection. No residential or business connection required. Must have residential or business connection.
Previous Insolvency
While previous insolvency does not be itself make a person ineligible, the Official Receiver may not accept the petition if the debt was previously bankrupt and some other conditions are met.
Must not have been bankrupt, proposed a Personal Insolvency Agreement or made a Debt Agreement in the previous ten (10) years. Must not have proposed another Personal Insolvency Agreement in the previous six (6) months.
Income Threshold
No. Yes. There are indexed amounts. No.
Asset Threshold
No. Yes. There are indexed amounts. No.
Debt Threshold
No. Yes. There are indexed amounts. No.

Frequently Asked Questions

False. Most people who apply for bankruptcy have jobs. In fact, a person who has two dependent children is able to earn over a $1,400 per week (as at February 2015) after tax before any contributions have to be made.

At the same time, there is no benefit to quitting your job because you think it means they will not accept your bankruptcy.

Yes. Any legal action taken by an unsecured creditor prior to bankruptcy including summons, garnishees, recovery action by the Sheriff will stop upon your bankruptcy.

False. Nobody plans for debt to get out of control. Bankruptcy Laws were made because the Government knows that good people can hit bad times. During bad times good people need help.

False. Just because you go bankrupt it doesn't mean you are barred from buying a house ever again. While you will not be able to purchase a house when you are bankrupt, you may purchase assets after discharge.

In fact, by not going bankrupt you will probably never be able to afford to buy a house because you can't save a deposit or afford mortgage payments because of your debt.

Your credit rating is affected by bankruptcy for 5 - 7 years, however, you could use this time to save for a deposit for a house.

False. Bankruptcy freezes debts incurred at the date of your bankruptcy and will clear most debts upon your discharge. In most cases, bankruptcy discharges you from the common debts like credit card debt and tax debts. Debts that are not cleared under a bankruptcy are HECS/HELP debt, debts from fraud, child support or maintenance debt.

It is unusual that someone who declares bankruptcy is denied international travel, however, you do need approval from the Trustee. You simply need to contact your Trustee and provide them with your travel dates, destination(s) and how the trip is being funded. If you travel a lot with your job for example you can apply for an open travel permit so you don't need to ask each time you want to travel.

No. Creditors are prevented from taking action to recover money from you relating to debts incurred prior to your bankruptcy.

An exemption to this is a secured creditor such as a mortgagee or car financier where they hold an asset as a security. You would need to maintain payment of the secured creditors' debts to keep the asset.

The Bankruptcy Act 1966 does not require you to disclose your bankruptcy to your employer.

False. In Australia this is far from the truth; for most people very little changes at all. Normal household effects such as furniture are exempt from bankruptcy. And, each bankrupt can own a vehicle to the current value of $7,900. Plus, if it's under finance and the payout is more than the value then you will be able to keep the vehicle as long as you maintain the finance repayments.

The only things you need to be aware of are the threshold amounts for assets and income.

False. The Trustee in the first instance will give the co owner the opportunity to purchase your share of the property for market value.

False. You are not required to file for bankruptcy just because your spouse needs to. In some cases, where both partners have a large amount of joint and separate debts, it would make sense for both parties to file for the bankruptcy at the same time.

False. This idea emerges from the fact that a bankrupt can not be a company director for the three year term of their bankruptcy, which is true. However, you can still run a business as a sole trader, employ staff, and make money. The Government wants you to start or continue to be self employed as a bankrupt for a multitude of reasons, but primarily because you are contributing to the economy.

There was a time when this was the case but it is not true now. Yes, your bankruptcy will be put onto a Government index online but the only way you can access that information is to pay for it. As a matter of fact, the only people that will ever actually know you're bankrupt are your creditors and the people you tell.

Not necessarily. Many company directors fear that if their company goes into liquidation, they will also be made bankrupt. The personal financial affairs of the director are separate from those of their company and whilst bankruptcy may be inevitable in some cases, it is not automatic and will depend upon the director's own financial position and the extent to which they may have guaranteed any liabilities of their company.