Coronavirus and changes to bankruptcy laws

We’re here to help and have recently made changes to the Commonwealth bankruptcy law to provide immediate relief to people facing financial difficulty due to the economic impacts of the Coronavirus.

Temporary debt relief

On 25 March 2020, changes came into effect to support individuals and businesses. The temporary debt relief measures include:

If you have been financially impacted by Coronavirus (COVID-19), you may be eligible to receive financial assistance - see the Services Australia website Affected by coronavirus for more information.

If your business has been impacted, you can find more information on the website:

Six month temporary debt protection

We have increased the temporary debt protection period available for people in financial difficulty from 21 days to six months. This protection now prevents recovery action by unsecured creditors for a six month period.

You can use this time to:

  • Seek advice from a free financial counsellor - contact the National Debt Helpline on 1800 007 007 or see Where to find help.
  • Negotiate a payment plan with your creditors. You can do this yourself or authorise someone else to negotiate on your behalf.
  • Consider if any of the formal insolvency options would be right for you - see What are my options?

For more information see What is temporary debt protection?

Case study: Julia

Temporary relief from enforcement action by a creditor

Julia is a small business owner who runs a café. The café has been hit hard by the economic impact of the coronavirus. 

After speaking with a financial counsellor Julia contacted AFSA and applied for Temporary Debt Protection. This stopped the creditor from enforcing the judgment – meaning her assets weren’t seized – for a period of up to six months.

Find out more about Julia's story here


Case study: Manpreet

How Temporary Debt Protection affects a creditor

Manpreet owns and operates a coffee bean supply company. Most of his customers have been impacted by the coronavirus. Many of Manpreet’s ongoing customers have fallen behind on payments, and now he’s struggling to pay his own bills.

A solicitor suggested Manpreet obtain a court judgement against one of his customers – Julia – to give him some enforcement options. Manpreet’s solicitor was able to have the judgment registered, but Julia filed for Temporary Debt Protection (TDP) with AFSA.

Find out more about Manpreet's story here

Changes to bankruptcy notices

  • We have increased the debt threshold required for creditors to apply for a bankruptcy notice against a debtor. The limit has increased from $5,000 to $20,000.
  • We have increased the timeframe for a debtor to respond to a Bankruptcy notice from 21 days to up to six months. This means that a creditor will have to wait until the six month period has passed before they can commence bankruptcy proceedings.

What happens to Bankruptcy Notices issued before 25 March 2020?

If the bankruptcy notice was issued before 25 March 2020, the debtor has 21 days to comply with the bankruptcy notice. For more information see Bankruptcy notices.

These temporary measures will be available for six months.

Seek free advice from a financial counsellor

You can get help from a free financial counsellor by contacting the National Debt Helpline on 1800 007 007.

Financial counsellors provide free, independent and confidential advice to help you manage your debts or negotiate with creditors.

Unlike financial planners or advisors, they do not provide investment advice or recommend products. They do not receive commissions.

The National Debt Helpline website also has step-by-step guides and useful information on how to deal with specific types of debts.

Impacts to people who are currently bankrupt

How will payments from the Coronavirus Economic Response Package affect people in bankruptcy?

  • Economic support payments - are not claimable by your bankruptcy trustee as income or as an asset, regardless of whether you receive the payments before or after the date of bankruptcy.
  • COVID-19 supplement payments - are claimable by the trustee if you receive them before the date of bankruptcy and it remains in your bank account when you become bankrupt. During bankruptcy these payments are included in your after-tax income amount. If your after-tax income exceeds a set amount, you may have to make compulsory payments. For more information see Income and employment.

More information about these types of payment are available at Services Australia.

Early access to superannuation – Should you receive payments from your superannuation under the Coronavirus Economic Response Package, there is no change to the way this payment is treated in bankruptcy. See Is my superannuation affected? for details on what happens to your super during bankruptcy. The Australian Taxation Office has more information about super payments on their website at Early access to your super.

Impacts to people in a Debt Agreement

What can people in an active Debt Agreement do if they are affected by the Coronavirus?

If you are in an active Debt Agreement and your circumstances have changed as a result of the Coronavirus, you can contact your debt agreement administrator to discuss your options, which may include submitting a possible variation proposal.

For example, depending on your particular circumstances, you may request that:

  • The payments be reduced with no change to the period
  • The payments you have made to date be accepted as the full payment (which would end the debt agreement - more likely to be accepted if you have made the majority of payments and have no capacity to continue)
  • The debt agreement to be extended for a specific period (to allow a temporary suspension or reduction in payments)

For more information see What is a debt agreement? 

Important information for practitioners

Guidelines for debt agreement administrators

We have made important temporary updates to the certified duties of debt agreement administrators, regarding proposals to vary debt agreements. These changes are currently in affect for six months (until 30 September 2020). 

For more information about these changes see Practitioners: COVID-19 and changes to debt agreements

For updated general guidelines for practitioners, including debtors in arrears notifications see Practitioners: COVID-19 and updated advice from the Inspector-General

Guidelines for trustees

General guidelines are now available for trustees regarding COVID-19 and its effect on our stakeholders. This includes information about Official Receiver services, meetings of creditors and statutory returns. 

For more information see Practitioners: COVID-19 and updated advice from the Inspector-General.

Contact us

Contact our National Service Centre: 

Telephone number:  1300 364 785

Monday to Friday 8:30 am to 8:00 pm (AEST and AEDT)

Closed on Saturday, Sunday and national public holidays.

If you need help outside these hours see Where to find help for a list of other support services.

More information