Personal Insolvency / Bankruptcy

Insolvency refers to the inability to pay debts as and when they fall due. Bankruptcy is the process of administering the estate of an insolvent person.

Bankruptcy provides a mechanism for the following objectives to be met:

  • Provide relief to the Debtor (i.e. Bankrupt) by enabling them to be released from the burden of their liabilities and an opportunity for a fresh start (after due process);
  • Provide equitable distribution of essentially all the Bankrupt's assets to all Creditors;
  • Enable an investigation of the Bankrupt's affairs and the circumstances leading up to their insolvency.

How do you become a Bankrupt?

There are two ways in which a person can become bankrupt as detailed below:

  1. Debtor's Petition - the Debtor completes and lodges a Statement of Affairs and Debtors Petition with the Australian Financial Security Authority ("AFSA")
  2. Creditor's Petition - a Creditor makes an application to the Courts to Bankrupt a debtor for outstanding debts greater than $5,000

What Bankruptcy means for:


Creditors of a Bankrupt Estates are no longer able to pursue the Bankrupt for payment unless Court permission is obtained.

Only valid secured creditors are able to enforce remedies against property of the Bankrupt.

Creditor's rights against the Bankrupt lie in their ability to claim in the Bankrupt Estate. Generally, upon discharge the Bankrupt is released from all provable debts.

Creditors will be kept informed regarding the Administration of a Bankrupt Estate by the Trustee.   A Creditor can obtain information from the Trustee about the administration of the Estate, requiring a Trustee to call a meeting of Creditors in some circumstances, remove a Trustee via process or appeal to the Court against a Trustee's decision and fix and review the Trustee's remuneration.


Upon becoming Bankrupt, with the exception of certain assets, the majority of assets the Bankrupt owns, has a right to or acquires during Bankruptcy vests in the Trustee.

The standard period of Bankruptcy is three years from the filing of a Statement of Affairs.

A Bankrupt is required to assist the Trustee of his / her estate by providing information on:

  • Income (contributions by the Bankrupt to their estate may be required); and
  • Examinable affairs

The Bankrupt is also required to provide the Trustee with:

  • All books and records in their possession; and
  • Passport (travelling overseas must be approved by the Trustee).

For further information regarding Bankruptcy please see the Fact Sheets available under "Publications" or visit the Australian Financial Security Authority (AFSA) web page, click here

To speak with one our representatives about your presonal debt solutions please see our contact us page.