A creditor has made me bankrupt

7 min read

People can choose to apply for voluntary bankruptcy, but you can also be made involuntarily bankrupt if someone you owe money to (a creditor) applies to the court.

If the court issues a sequestration order this means you are now bankrupt. Once this happens, it’s important that you seek advice and understand your obligations and the consequences of bankruptcy.

The sooner you act, the sooner your period of bankruptcy will begin and allow you to make a fresh start. If you delay, your bankruptcy may be extended and you could face penalties.

How did I become bankrupt?

Creditors can apply to make you bankrupt if you owe them money and haven’t been able to come to an agreement to repay the money you owe. To do this, a creditor needs to apply to the court through a process called a creditor’s petition.

To make you bankrupt, the creditor needs to prove you have committed an act of bankruptcy. Most often, this is done through serving you with a bankruptcy notice for the amount you owe. If you don’t pay the money owed, or reach an agreement within the time given in the notice, you are committing an act of bankruptcy and the creditor can use that to apply to the court.

The court will then hear the creditor’s petition proceeding and make a decision about whether to make you bankrupt. If they decide to make you bankrupt, they issue a sequestration order and a trustee is appointed to manage your bankruptcy.

The Federal Court of Australia – Bankruptcy Guide provides more information about the court process.

What should I do now?

Now you have been made bankrupt there are some important next steps.

Submit a Bankruptcy Form

You need to file a Bankruptcy Form (also known as a Statement of Affairs) within 14 days of the date you were advised of your bankruptcy. If you don’t do this, you could be bankrupt for longer and you could face penalties.

You can fill out and submit your Bankruptcy Form using AFSA's Online Services.

Your bankruptcy normally ends 3 years and 1 day from when we accept your Bankruptcy Form.


The earliest date your bankruptcy can end is 3 years and one day from when your completed Bankruptcy Form is filed and accepted. The period of bankruptcy can be extended by your trustee in some cases though.

This means that the sooner you file the form and it is accepted, the sooner you are likely to be released from bankruptcy.

If you don’t submit a Bankruptcy Form, you will remain bankrupt indefinitely.

You can get help to complete your Bankruptcy Form from a free financial counsellor by contacting the National Debt Helpline on 1800 007 007.

For more information on financial counsellors and other support services see Where to find help.

Failing to file a Bankruptcy Form is an offence under the Bankruptcy Act and may be referred to the Commonwealth Director of Public Prosecutions for prosecution.

Restrictions and obligations during bankruptcy

There are serious consequences to bankruptcy – such as affecting your ability to obtain credit, your trustee may be able to sell some of your assets and a record of your bankruptcy will appear permanently on the National Personal Insolvency Index (NPII).

See Consequences of bankruptcy to find out more about how bankruptcy might affect you.

During bankruptcy you also have certain obligations and face some restrictions. It is your responsibility to provide information and tell your trustee when your circumstances change. 

You must inform your trustee if you:

  • change your name, address, income or employment
  • forgot to include debts or assets in your bankruptcy application
  • buy or gain new assets (e.g. a house, car, winnings)
  • receive an inheritance (could be money or other assets).

During bankruptcy you must also:

  • request permission from your trustee to travel overseas
  • lodge your Bankruptcy Form within 14 days of notification of bankruptcy
  • reveal your bankruptcy if you apply for credit over a set amount
  • disclose your bankruptcy if you trade under a business name that doesn’t contain your name (subject to the trustee’s power to sell the business)
  • provide information to your trustee regarding your finances (such as income and mortgage statements)
  • make compulsory payments (or contributions) if you earn over a set amount
  • not manage or be an officer of a company.

There may be penalties if you don't comply with the above obligations and restrictions. In some cases, your trustee may extend your bankruptcy.

Your trustee

When you become bankrupt, a trustee is appointed to manage your bankruptcy.

It’s important to contact your trustee as early as possible. Your trustee will help you understand how bankruptcy affects you and your obligations and responsibilities during your bankruptcy period.

They will work with you, and your creditors, to achieve a fair and reasonable outcome for all. During bankruptcy, you have an obligation to provide information to your trustee, including changes to your circumstances. This may involve supplying books, bank statements and other documents the trustee asks you to provide.

The creditor who made you bankrupt may nominate a registered trustee to manage your bankruptcy. If they don’t, the Official Trustee (or AFSA) will become your trustee by default. In some cases, the Official Trustee may transfer the administration of your estate to a registered trustee.

If you’re not sure who your trustee is, contact us for assistance.

If you have concerns about an action taken by your trustee, you can make a complaint or provide feedback to AFSA.

Challenge the sequestration order made against you

You can apply for a review of the sequestration order made by the court. You must make an application to the court within 21 days of the order. In some cases, the court can extend this time period.

Reasons for a review may include if you believe:

  • you don’t owe the money claimed by the creditor 
  • you didn’t commit an act of bankruptcy (e.g. you weren’t served with a bankruptcy notice).

If your review is successful, the court will set aside the sequestration order and your assets will be returned to you.

To apply for a review of the sequestration order made by the court, use the forms on the Federal Circuit Court of Australia website. For help with reviewing a sequestration order you should seek legal assistance.

Important: If you apply for a review of the order you must still lodge your Bankruptcy Form and comply with your obligations as a bankrupt, until the court makes a final decision.
Case study: Maria

Sequestration order obligations

Maria used to own a restaurant in Townsville, Queensland. The restaurant failed and Maria owed debts to a number of suppliers. She owed $25,000 to District Food Supplies, who took Maria to Court. The Federal Circuit Court made a sequestration order against Maria which meant she became bankrupt.

The Official Trustee (whose functions are carried out by AFSA) was appointed as the trustee of the bankruptcy. District Food Supplies gave Maria’s contact details (including her address and mobile number) to AFSA.

AFSA sent Maria the following documents by registered post:

  • a letter telling her she had been made bankrupt by the Court
  • information about the sequestration order process
  • a form for her to complete
  • instructions for completing the form.

The letter told Maria she must complete the bankruptcy form and lodge it with AFSA within 14 days. It also said the three year bankruptcy period would not start until AFSA had accepted the form. If Maria never submitted the form she would be bankrupt forever.

AFSA called Maria to discuss her bankruptcy. Maria argued with her case officer. She was angry about being made bankrupt. Maria argued that she should not have to fill out the bankruptcy form as she did not agree with the court decision. The case officer reminded her that she was required by law to lodge her bankruptcy form in 14 days and there were penalties for not doing so.

Maria failed to lodge her bankruptcy form so AFSA issued Maria with a formal notice. This notice instructed Maria to file her bankruptcy form with AFSA within 14 days. Failing to comply with this notice is an offence and a person can be prosecuted.

Maria failed to comply with the notice. AFSA’s Enforcement team investigated the matter. The matter was prosecuted by the Office of the Commonwealth Director of Public Prosecutions (CDPP).

At court, Maria pleaded guilty. She was convicted, received a fine and was ordered to pay costs. Maria filed her bankruptcy form later that week.

Failure to submit a bankruptcy form is a serious offence. AFSA, in partnership with the CDPP, is committed to investigating and prosecuting those who deliberately avoid their obligations.

*These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.

Useful links

Assistance with completing the Bankruptcy Form

National Debt Helpline

Review of sequestration order

Federal Circuit Court of Australia website