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Bankruptcy FAQs

How long does bankruptcy last?

Bankruptcy typically lasts for 3 years and 1 day, plus two years after you are discharged from bankruptcy (generally 5 years in total). It can be extended to up to 8 years under certain circumstances, such as not complying with requests made by your Bankruptcy Trustee.

There is legislation currently in parliament that proposes changes to Australia’s insolvency laws. This legislation proposes to shorten the bankruptcy period to 1 year. Should the legislation be passed, it will also apply to all existing bankruptcies.

What debts can be included in bankruptcy?

All unsecured debts such as: tax debts, credit card debts, personal loans, store cards, school fees, debts under personal guarantees and utility bills.

You must continue paying some debts during your bankruptcy period. These include: Penalties and fines imposed by the court, Unliquidated damages, Child Support and Certain Centrelink Debts, HECS and HELP debts and debts incurred after your bankruptcy begins.

Bankruptcy does not include secured debts, such as a mortgage or vehicle loans; as such, if you fail to make the repayments on these debts, the creditors are within their rights to repossess the security (home or car) and sell it to recover their money. If the creditor sells the asset and a shortfall arises (more is owed than the amount sold), the shortfall will be included in the bankruptcy.

How long is bankruptcy noted on my credit file?

Your bankruptcy will remain on your credit file for the entire period of bankruptcy plus two years after your a discharges (generally 5 years total).

Your name will also appear on the National Personal Insolvency Index (NPII). This is a register of all personal insolvency activity. Your name is on the NPII for life.

Can I keep my house in bankruptcy?

Upon bankruptcy your interest in real properties forms part of a pool of assets the Trustee can sell. However, depending on your circumstances, there are ways you can keep your property.

Your situation will be reviewed and the Trustee will discuss with you the options available given your circumstances.

There are options available whether you own property jointly or solely with your spouse or another person. For example, your interest in a jointly owned property can be sold to the other owner or a third party.

Will I lose all my assets in bankruptcy?

You’re able to keep household goods such as beds, clothes, whitegoods, etc. You will also keep certain tools of the trade and a vehicle up to the statutory limit.

Your superannuation is also protected if held in a regulated and complying superannuation fund.

I hear the trustee will take half of my income upon bankruptcy?

A bankrupt can continue to earn an income during the bankruptcy. If a bankrupt has annual earnings above a set threshold, one half of the difference after deducting the threshold would be available for the trustee. The threshold is increased for every dependent residing with the bankrupt.

The amount payable is paid in installments that is affordable to the bankrupt.

The Trustee will assess your income at the end of each financial year (generally across 3 years).

Will bankruptcy affect my employment?

Bankruptcy doesn’t stop you from working. However, declaring bankruptcy may make it difficult for you to hold a particular licence, which may prevent you from being a member of that professional body or trade organisation. For instance, a bankrupt may not be able to hold a Real Estate licence and therefore, cannot operate as a real estate agent while they are bankrupt. There are certain professions that you cannot work as a bankrupt; typically in those professions where you are required to operate a trust account.

There may also be limitations to operating as a sole trader and you cannot be a director of a company.

Can I travel overseas whilst Bankrupt?

Yes. In most cases, you can travel overseas while you are bankrupt.

Before you travel, you must obtain written approval from your Trustee. Typically, if you continue to co-opeate with your trustee, you will be allowed to travel.

What happens to my debts?

Once you are bankrupt you do not need to repay your debts. Your creditors will only be entitled to prove in the bankrupt estate with respect to their debt. The Trustee will notify all creditors of the bankruptcy and they should stop contacting you at once. If a creditor is suing you with respect to a provable debt, you will no longer need to be involved in the legal proceedings.

Upon discharge from bankruptcy you will be released from all provable debts. Most common debts, such as credit cards and personal loans, are provable in bankruptcy. However, there are some debts which are not provable such as HECS and court fines. Furthermore, bankruptcy does not impact the rights of secured creditors and a secured creditor will retain the right to take possession of property if repayments are not made.

Can I keep my tax refunds?

Tax refunds for income earnt prior to bankruptcy are an asset of the bankrupt estate and will be claimed by the Trustee. You are able to retain tax refunds for income earnt after bankruptcy and these amounts will be included in your assessable income for income assessment purposes.

If you owe the ATO a debt, the ATO will withhold your tax refunds during the period of bankruptcy. Following discharge from bankruptcy, you will be entitled to retain tax refunds again.

Can I continue to trade my business as a sole trader?

Your sole trader business and assets vest in the Trustee and the Trustee is required to deal with the the business. Ordinarily, the Trustee will only sell the business or assets if they have substantial value. If you are operating a small business with minimal assets, it is unlikely that the Trustee would do anything with the business.

If you continue trading as a sole trader whilst bankrupt and the business trades under a business name other than your own, you must inform every person that you deal with, that you are an undischarged bankrupt. If you trade under your own name, disclosure of your bankrupt status is not required, unless seeking credit over a statutory limit (an indexed amount).

What happens if I am a director of a company?

As a bankrupt you are not allowed to manage a company. You would need to resign your office holdings in the company.

If you hold any shareholdings in the company, those shareholdings will be available for the trustee to realise. This will also mean that the trustee would be able to make any decisions regarding the company as a shareholder. If you require those shares back once you are discharged from bankruptcy, we can assist you with that process.

Can i continue with a claim I have against another person?

Once you are bankrupt, any current claims you have against another person is put on hold. The trustee will review the claim and may either choose to take on the claim or discontinue the claim.

As a bankrupt you will be unable to continue the claim even when you are discharged from bankruptcy. If you wish to be able to take on the claim again once you are discharged from bankruptcy, we can assist you with that process.

Can I get out of bankruptcy early?

Yes, there are two ways you can get out of bankruptcy early.

The first way if to pay all your debts in full. This would include your trustees costs.

The second way is to make an offer to your unsecured creditors to pay a sum that is less than 100 cents in the dollar. If the majority in number and more than 75% value of your creditors accept your offer, you are no longer bankrupt.

The above options are called, 'obtaining an Annulment of your bankruptcy' and we can assist you with this process. You can apply to have your bankruptcy annulled at any stage of the bankruptcy. You can even annul the bankruptcy once you have been discharged from bankruptcy, if you pay all creditors in full. Our team will assist you with every stage of this process.

What happens after your bankruptcy is finished?

Once your bankruptcy is over, your credit file and the National Personal Insolvency Index will show that you are a discharged bankrupt . After your bankruptcy, you may still find it difficult to secure finance through traditional lenders, however there are many financial institutions outside of the traditional sphere who are happy to lend to Australians with a bad credit history. We, through Revive Finance, can help you with this.

Being a discharged bankrupt allows you the opportunity to slowly rebuild your credit score and truly put your financial issues behind you. To rebuild your credit rating and gain trust with lenders, you can:

  • Pay all your bills on time
  • Pay more than the minimum
  • Keep up to date with payments
  • Avoid making excess credit enquiries
  • Avoid credit cards at all costs and instead develop a healthy savings account

How Can We Assist You Today?

Business Debt Icon Business
Personal Debt Icon Personal
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Types Of Unsecured Debts

Credit Card Icon Credit/Store Cards
Personal Loan Icon Personal Loan
Pay Day Loan Icon Pay Day Loan
Tax Debt Icon Tax Debt
Disconnected Utility Bill Icon Utility Bill
Other Debts Icon Other
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Your Business Structure

Sole Trader Icon Sole Trader
Partnership Icon Partnership
Company Icon Pty Ltd Company
Trust Icon Trust
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Unsecured Debt Amount

$10,000
$1,000
$100,000+

Business Debt Amount

$100,000
$10,000
$1,000,000+

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