A creditor has made me bankrupt

If you're now bankrupt because of a sequestration order made by a court, you must lodge a statement of affairs with the Official Receiver. It's important that you understand the consequences of bankruptcy and your obligations.

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Important steps to take when a creditor makes you bankrupt

If a court issues a sequestration order, this means you are now bankrupt and a trustee has been appointed to manage your bankruptcy. Once this happens, it's important that you understand your obligations and the consequences of bankruptcy.

Read below for your important next steps.

Submit a statement of affairs

After being made bankrupt by sequestration order you must complete and submit a statement of affairs with the Official Receiver (AFSA). This must be done within 14 days of the date you were advised of your bankruptcy.

End of bankruptcy

Automatic discharge will generally* happen 3 years and 1 day from when you file your accepted statement of affairs. 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 statement of affairs, you will remain bankrupt indefinitely and could face penalties.

* Note: In some cases, your trustee can extend your bankruptcy by lodging a notice of objection to discharge with the Official Receiver. An objection will extend the period of bankruptcy so automatic discharge will not occur after the usual 3 years and 1 day.

Can my trustee extend my bankruptcy?

Contact AFSA to request a statement of affairs to complete, or request one from your trustee.

You can get help to complete your statement of affairs 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 AFSA's debt help.

Do not use the online bankruptcy form if you're now bankrupt because of a sequestration order made by a court.

Please contact AFSA at info@afsa.gov.au or 1300 364 785 to request a statement of affairs form to complete, or request one from your trustee.

Submit your completed statement of affairs and any attachments via:

  • Email: registry@afsa.gov.au, or
  • Post:
    Australian Financial Security Authority
    GPO Box 1550
    ADELAIDE SA 5001

Once you've submitted your form, we will respond to you within 14 days.

Failing to file a statement of affairs is an offence under the Bankruptcy Act 1966 and may be referred to the Commonwealth Director of Public Prosecutions for prosecution.

Understand the consequences of bankruptcy

There are serious consequences to bankruptcy, such as:

Learn more about the consequences of bankruptcy and how you may be affected.

Understand your obligations and restrictions during bankruptcy

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

Learn more about your responsibilities during bankruptcy at What are my obligations?

Penalties may apply for non-compliance

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

Can my trustee extend my bankruptcy?

Contact 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. They will help you understand how bankruptcy affects you, and your obligations and responsibilities during bankruptcy. 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 and tell your trustee when your circumstances change. 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 (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.

How did I become bankrupt?

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 by presenting a creditor's petition.

To make you bankrupt, the creditor needs to prove you have committed an 'act of bankruptcy' within the 6 months prior to their application. 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. The creditor can then ask the court to make you bankrupt.

The court will hear the creditor's petition proceeding and decide if you should be made bankrupt. If you are made bankrupt, the court issues 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.

How do I challenge the sequestration order made against me?

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 (for example, 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 advice.

If you apply for a review of the order, you must still lodge your statement of affairs and comply with your obligations as a bankrupt, until the court makes a final decision.

Sequestration order obligations

Maria used to own a restaurant in Townsville, Queensland. The restaurant failed and Maria owed debts to several 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 statement of affairs for her to complete
  • instructions for completing the statement of affairs.

The letter told Maria she must complete a statement of affairs and lodge it with the Official Receiver (AFSA) within 14 days. It also said the three-year bankruptcy period would not start until AFSA had accepted her statement of affairs. If Maria never submitted a statement of affairs she would be bankrupt forever.

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

Maria failed to lodge her statement of affairs so AFSA issued her with a formal notice, instructing her to file her statement of affairs 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 and 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 Statement of Affairs later that week.

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

Note: 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.