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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

Generally, bankruptcy lasts for three years. However, depending on your circumstances it can last for five or eight years.

Once you are bankrupt, your name 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.

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. 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. 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 backing from one of our specialists, we can assist.
  2. A creditor can force you into bankruptcy through a bankruptcy sequestration order if you are not paying the debt owed to them. If you’ve been made bankrupt this way, your 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 of debt in which a bankruptcy notice can be issued is $5,000. You should consider the bankruptcy regulations and consequences involved before you decide to declare it. 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.

Filing 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 file for 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.

This is all done in a bid to recover some of the money you owe to your 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.

Secured debts cannot be included in a bankruptcy. These can include:

  • A loan secured against a vehicle (within the indexed amounts)
  • Radio Rentals
  • Centrelink debts
  • Unpaid fines

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.


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 you earnt before you entered bankruptcy. Any tax refunds you earn 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 it is valued at $7,900 or under.

Under the strict bankruptcy regulations, you are not permitted to own property and it is possible you may lose your home.

However, there are legal ways you can keep your family home during the bankruptcy period. Your Bankruptcy Trustee will take ownership of your share of the property, but if you have joint ownership of the property with your spouse, your trustee may offer to sell your share to your spouse for your share of the equity.

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

During the Bankruptcy Period

In most cases, bankruptcy will not affect your employment. However, a bankrupt is unable to work in certain trades or professions due to restrictions imposed by professional associations or licensing authorities. These positions include a police officer, security guard, realtor and financial advisor.

During the bankruptcy period, you can earn an unlimited amount. However, if you earn over the income threshold limit for your situation, every 50c on the dollar will become a contribution towards your bankruptcy and be distributed among your creditors.

If you are made redundant or receive a pay-out after losing your job, that money can also be made a contribution and distributed to your creditors.

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.

This depends on your circumstances. Superannuation payments received before bankruptcy are claimable by your trustee, along with any assets you purchased with those funds. On the other hand, superannuation payments you receive during or after your bankruptcy are not claimable by your trustee.

Superannuation you receive as an income stream forms part of your assessable income. Therefore, if you earn over the threshold amount, you may need to make compulsory payments towards your bankruptcy.

Someone who is bankrupt is also not allowed to be a trustee of a self-managed super fund.

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.

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.

If you’re looking at applying for a loan, you’ll need to wait until after you’ve been discharged from your bankruptcy.

Lenders will make an enquiry on your credit report when you apply, see you are bankrupt and decline your application. For finance over the threshold of $5,778, you will need to disclose to the lender you are currently bankrupt.

There are loans available in an emergency, but they come with extremely high, usually unsustainable interest rates. These types of loans are called payday loans and should be avoided.

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