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Bankruptcy Frequently Asked Questions

At Revive Financial, we understand how stressful the thought of bankruptcy can be. So we’ve compiled a list of frequently asked questions to help make the process easier.

The Bankruptcy Process

Bankruptcy lasts for 3 years, however can be extended by your Trustee to 5 or even 8 years if you fail to comply with your obligations under bankruptcy (e.g. confirming annual income during the bankruptcy at the Trustee’s request).

Once you are bankrupt, the bankruptcy will be listed on your credit file for 5 years and on the National Personal Insolvency Index (NPII) for life.

There’s no limit to the number of times you can declare bankruptcy. If you’ve been bankrupt before and have found you’re once again in a position where you’re struggling with your debts, you can declare personal bankruptcy again.

It is, however, important not to be seen to be taking on credit with the intention of declaring bankruptcy to defeat creditors.

After you declare bankruptcy, you’re sent a bankruptcy number (AFSA administration number) in the mail. Your appointed Bankruptcy Trustee will work with you to ensure you comply with all bankruptcy regulations. To do this, the Trustee may take possession of any assets like your car or property and sell them to distribute the profits among your creditors. Assets are only claimed if they are over the allowable thresholds. Our team at Revive Financial and your Trustee can assist in arranging to keep/protect any assets you may have over these thresholds.

You must personally comply with the bankruptcy regulations for 3 years or until you are discharged from your bankruptcy.

You can go bankrupt in one of two ways:

  1. You can declare voluntary personal bankruptcy (debtors petition). To do this, you must complete Form 3 and Form 6 and submit them to AFSA along with the required supporting documents. These forms are available for download on the AFSA website. You can complete them yourself, but if you’d like the guidance or assistance from one of our specialists, we can help.
  2. A creditor can force you into bankruptcy through a bankruptcy sequestration order if you are not meeting your repayment obligations to them (creditors petition). If you’ve been made bankrupt this way, your creditor appointed Bankruptcy Trustee will be in touch to begin the process. You have the ability to challenge a sequestration order by seeking a review in court.

The minimum amount in which a creditor can issue a bankruptcy is $5,000. You should consider the bankruptcy restrictions and consequences involved before you consider voluntary bankruptcy. If you are only struggling with a small amount of debt, the impact bankruptcy has on your life may outweigh the benefits of eliminating the debt.

No, you may not be a company director during the bankruptcy period. You are also unable to manage a company unless you have the permission of a court.

You can continue to work as a sole trader if you declare bankruptcy. When invoicing your clients during the Bankruptcy period, your full name must appear on all invoices or you will need to disclose to your clients that you are Bankrupt.

If you work in an industry that requires you to have public liability insurance, this is not avaliable to you anymore and you may have to take on work as an employee, instead of a sole trader.

Your ABN is not affected and stays active.

Declaring bankruptcy is the act of declaring to your creditors that you don’t have enough wealth, either in cash or assets, to repay the debts you owe.

So, when you declare bankruptcy, a Trustee is assigned to you to enforce a number of restrictions. These include taking possession of and selling your assets, garnishing your wages and limiting overseas travel. Assets and wages are not claimed unless they are over the Bankruptcy thresholds.

During bankruptcy, assets and/or income above the threshold amounts will be recovered by your Trustee and distributed to creditors. When the bankruptcy period is over, your debts are considered to be settled and creditors cannot pursue you for further payment of these debts.

All provable unsecured debts are cleared by bankruptcy. Provable unsecured debts often include:

  • Credit and store cards
  • Unsecured personal loans and payday loans
  • Gas, electricity, phone and internet bills
  • Overdrawn bank accounts and unpaid rent
  • Medical, legal and accounting fees

In some cases, you may need to confirm to see if bankruptcy will cover specific debts, including:

  • Centrelink debts
  • Australian Taxation Office (ATO) debts
  • Victims of crime debts
  • Fines and state penalties

All debts must be acknowledged on the bankruptcy declaration. Secured debts are listed on the bankruptcy, however, are generally not effected by bankruptcy if repayments continue to be met and the secured asset value does not exceed bankruptcy thresholds. Secured debts are loans used to purchase an asset, in which the asset will be reposessed due to non-payment. Secured debts include:

  • Mortgages
  • Car loans
  • Hire purchases or rent to buy arrangements

You must maintain the repayments on these debts outside the bankruptcy. Failing to make payments on these debts may result in recovery action, repossession of the asset or assets, or garnished wages. However, if an asset is returned to the creditor before or during the bankruptcy, any amounts which remain outstanding become unsecured and are cleared as an unsecured debt.

Some debts are never cleared during bankruptcy. These include:

  • Court imposed penalties or fines
  • HECS/HELP debts
  • Child support and maintenance
  • Debts incurred after the date of bankruptcy
  • Unliquidated debts (e.g. a debt where the amount outstanding has not been determined by you and the creditor)

If you don’t hear anything from your Bankruptcy Trustee it simply means they have everything they need from your application. They will be working with your creditors. No news is good news!

If you need to make any changes during your bankruptcy period such as contact details or income, you need to contact your Trustee to have these details updated as soon as they occur.


During the bankruptcy period, you still need to lodge your tax returns as usual. You need to inform your appointed Bankruptcy Trustee when you receive your tax refund and supply a copy of your ATO Notice of Assessment.

The Trustee can claim any tax refunds that apply for income earned before you entered bankruptcy. Any tax refunds for income earned after you have entered bankruptcy form part of your assessable income. You can only earn an assessable income up to the threshold limit before you are required to make compulsory payments.

You will be allowed to keep most household and personal items. Valuable jewellery, antiques and fine art might be sold by your Bankruptcy Trustee to repay your creditors. You are allowed to keep work tools up to the value of $3,750.

You can keep your car as long as its value fits within the set threshold. Currently, you can keep your car if its net value (aboive secured loan amounts) is $7,900 or under.

Under the Bankruptcy Act, your Trustee can claim any real estate or property you own. Generally, real estate or property will only be claimed where the sale of the asset will realise funds able to be distributed to your creditors. Where there is no value above the mortgage amount at the time of bankruptcy, the Trustee may not exercise the right to claim the asset, however retains the right to do so at any time deemed appropriate during the bankruptcy. A Bankruptcy Trustee may also retain an interest over the property beyond any real estate or property beyond the bankruptcy period if the value is expected to increase in the foreseeable future.

It is possible to make a legal arrangement with your Trustee to retain real estate or property. An agreement can be reached to compensate the Trustee for any value in the property at the time of declaring, crystalising the asset value amount and allowing the agreed net asset value to be paid to the trustee over the term of the bankruptcy.

If you receive an inheritance or win the lottery, your Bankruptcy Trustee is able to claim this to partially or fully repay your debts, including Trustee fees.

If during your bankruptcy you are going to receive an injury compensation payout, this is protected and you will recieve the full amount. You will, however, need to provide the necessary documentation to your Bankruptcy Trustee to prove that it was an injury payout.

During the Bankruptcy Period

Once you’ve been declared bankrupt, hassling phone calls from your creditors should cease. But some companies may have sold their debts to a debt collection agency and may not be aware you are bankrupt. Here’s what you should do:

  1. Getting calls from your creditors? tell them you’re bankrupt, give them your AFSA administration number (bankruptcy number) and start date, then refer them to your bankruptcy trustee.
  2. If you continue to get emails from a creditor, attach the email and forward it directly to your trustee.
  3. Make sure you ask your creditor if they’ve sold your debt to a debt collection agency. If they have, let your Trustee know.
  4. Check if your creditor is referring to the same debt that’s listed in your bankruptcy. If you’ve forgotten to list a debt, you can add it through AFSA.

A full list of employment restrictions can be found on AFSA’s website. It is important to review current employment contracts to ensure you have not made assurances directly to your employer outside of the bankruptcy employment restrictions.

If you are made redundant or receive a pay-out after losing your job, the payment will generally be included in calculating your assesable income for the period it was recieved.

You are allowed to travel overseas while you are bankrupt, but you must request permission from your Bankruptcy Trustee to leave Australia. It is recommended you give your trustee at least four weeks’ notice of your intentions to travel, so they have enough time to gather the required information and give you approval. You must provide your Trustee with:

  • The reason why you want to travel overseas,
  • The dates you intend to travel,
  • Your contact details including overseas address so your trustee can contact you,
  • Proof of who is paying for the travel, and
  • Employer evidence if you’re travelling overseas for work.

More information on travellin overseas during Bankruptcy can be seen on the AFSA website. 

No. In short, superannuation is a protected asset under bankruptcy as long as it remains in your complying superannuation fund. Any additional voluntary contributions made to your super fund leading up to the bankruptcy may be claimed by your Trustee as they were made voluntarily, instead of repaying creditors.

If you are receiving payment from your superannuation:

  • Superannuation payments recieved before bankruptcy are claimable by your Trustee, along with any assets you purchased with those funds
  • Superannuation payments you receive during or after your bankruptcy are not claimable by your Trustee

A bankrupt may not remain the Trustee of a self-managed super fund (SMSF). Generally, a SMSF would have to be converted to a small APRA fund, or the funds have to be rolled into a complying industry or retail fund before the SMSF is wound up.

If you’ve lost your bankruptcy number (AFSA administration number), contact your Bankruptcy Trustee and they will have a record. If you are unsure of who your Trustee is, contact AFSA via their website or call them directly on 1800 364 785.

It’s generally suggested you wait until being discharged from Bankruptcy as a minimum before applying for further loans. Lenders will generally check your credit report, see you are bankrupt and decline your application. There are loans avaliable in an emergency, but they come with extremely high, usually unsustainable interest rates. These types of loans should be avoided wherever possible.

As long as the debt is a provable unsecured debt and the open date is before your bankruptcy acceptance, the debt will be included and is generally extinguished (refer to exemptions above).

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