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Bankruptcy

Here at Debt Free Australia we always try to find the least severe financial solution before we consider bankruptcy. With that philosophy in mind we offer a free financial assessment.  The financial assessment will explore if you are eligible for any alternatives to bankruptcy.

If you are not eligible for an alternative solution and you wish to file for bankruptcy, we see it as our role to firstly educate you about bankruptcy.

Bankruptcy laws are very complicated and each case may have its own set of unique issues. We have prepared answers to the most frequently asked questions.

If any aspect is unclear please call our friendly staff on our toll free number 1800 676 598 and they will be glad to assist.

How do I apply for bankruptcy?

If you wish to file for bankruptcy on a voluntary basis (as opposed to being forced into bankruptcy by a creditor through the courts) then you can do so by simply completing the necessary bankruptcy forms and lodging them with AFSA. You will need to complete a Statement of Affairs and a Debtor’s Petition.

If you feel daunted by completing the forms yourself, we offer a service where we will assist you to complete the forms for a once off fee starting from $400.

Please note that from 1 April 2014 onwards, a fee of $120 will be payable to AFSA in order to lodge a debtor’s petition.

Where the bankruptcy is administered by the Official Trustee, a fee of $150 will also be incurred for a bankrupt to lodge a request to travel overseas.

How long will I be bankrupt?

A typical bankruptcy will last for 3 years after your Statement of Affairs is lodged and accepted by AFSA.

What debts go into bankruptcy?

Unsecured and provable debts go into a bankruptcy. Understanding what debts are provable (ie can be included) and what debts are non-provable (ie debts which cannot be included) can be very complicated.  AFSA has published a list of debts which are provable/non-provable.  Click here to learn if your debts are provable in bankruptcy.

Non-provable debts will need to be paid outside of your bankruptcy.  In other words you will continue to be liable to pay them and bankruptcy will not extinguish them.

Will all of my assets be sold in bankruptcy?

Most personal assets will be sold in bankruptcy.  The only protected assets are listed below:

  • Most essential household goods (but not luxury household goods)
  • Motor Vehicle (worth < $7,350)*
  • Tools of Trade (worth< $3,600)*
  • Superannuation (subject to limits)

These limits are indexed and published every six months by AFSA. Click here to see the current published amounts.

Can I travel overseas whilst bankrupt? 

As a bankrupt you are not free to travel overseas without first obtaining permission from your Bankruptcy Trustee. Before granting permission your Bankruptcy Trustee will most likely want to see an itinerary and evidence as to who paid for trip.  The Trustee may also place some conditions on your travel such as payment of any outstanding compulsory income contributions or in some cases a bond prior to travel.

Will my employment be affected?

This is a difficult question and unfortunately we cannot always give a simple “yes” or “no” answer.  If you are a finance/law professional like an accountant, solicitor or company director then your professional registration is most likely going to be affected or restricted in some way. But if you are a public servant, heath care professional, or in public services (like a teacher or police officer etc) then it is unlikely that your employment would be affected by bankruptcy.

If you hold any type of licence you should contact your licencing body prior to filing for bankruptcy.  In our experience the licencing bodies will only assess your application on a “case by case” basis.

AFSA has prepared a publication which may be of some assistance.  Click here to view it.

Will there be a limit on my income?

There won’t be a limit on what you can earn, but if you earn over the statutory thresholds (as determined by the government) you may become liable to pay statutory income contributions into your bankrupt estate.  These thresholds vary depending on how many dependents you have. Click here to use our bankruptcy income contribution calculator.

Can my bankruptcy be extended?

In certain circumstances the bankruptcy term can be extended from the usual period of 3 years up to 5 years or 8 years.  The time frame in which your bankruptcy term can be extended depends on the situation.

Click here to learn how & why your bankruptcy term could be extended from 3 to 5 years

Click here to learn how & why a bankruptcy can be extended from 3 to 8 years

Can I end my bankruptcy early?

Bankruptcy is usually for a 3 year period, however, in some cases it can be ended earlier when either one of the following occurs:

  • Your Trustee annuls the bankruptcy by paying your debts in full (including any interest); or
  • Your creditors agree to annul the bankruptcy by accepting to receive a settlement offer (this usually happens when a friend or family member of the bankrupt offers a lump sum of money to settle the bankruptcy debts for less than what is owed); or
  • The court annuls the bankruptcy by an order.

Once released from bankruptcy (either through regular discharge after 3 years) or through an early annulment (as described above) you will be released from all of your debts which you owed at the time you went bankrupt.

Will the public be aware that I am bankrupt?

Your Bankruptcy Trustee will not tell the general public that you are bankrupt, only the banks and any others you may listed as owing monies to. There will be a record of your bankruptcy kept on the National Personal Insolvency Index, which the public can have access to, but only after paying a fee.

If your Bankruptcy Trustee calls a meeting of creditors to consider any proposal to annul your bankruptcy early (as we discussed above), the trustee must advertise the meeting on the AFSA website. The public may become aware of this through regular Internet searches.

What impact will bankruptcy have on my credit file?

When you lodge your bankruptcy with AFSA you will have a default placed on your credit file for a period of 7 years. As bankruptcy usually lasts for 3 years, after you are discharged you will still have a 4 year period where there is a mark against your name. It will be up to the individual creditor or finance company as to whether or not they want to loan to you during this time.

Will any transactions get reviewed or scrutinized?

It is the role of a Trustee in Bankruptcy to review and scrutinize transactions entered into prior to bankruptcy. If the transactions were entered into with the intent to keep assets from creditors, then in certain cases these can be clawed back. Review our page on the most common transactions which can get clawed back.