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Although bankruptcy can provide relief if you are unable to repay your debts, there are consequences which may affect you. Being aware of these consequences can help you decide if this is the best option for you.
Video: Consequences of bankruptcy
To help understand the consequences of bankruptcy and how they may impact you, you can speak to a financial counsellor. Financial counsellors offer free, independent and confidential services that will help you consider your options for dealing with unmanageable debt. To speak with a free financial counsellor contact the National Debt Helpline on 1800 007 007.
For more information on financial counsellors and other support services see Where to find help.
You will have a trustee that will manage your bankruptcy
Before you apply for bankruptcy, you can choose a registered trustee to administer your bankrupt estate. If you do not choose a registered trustee AFSA may seek the consent of a registered trustee to manage your bankruptcy. If a registered trustee does not provide their consent to act then your estate will initially be administered by the Official Trustee (AFSA).
Bankruptcy may affect your income, employment and business
If you earn over a set amount, you may need to make compulsory payments to your trustee. There may also be some restrictions on your employment and running a business.
For more information see: Income and employment
Bankruptcy does not release you from all debts
Most unsecured debts are covered in bankruptcy - this means you no longer have to repay these debts. There are some exceptions.
For more information see: What happens to my debts
It affects your ability to travel overseas
You must request permission from your trustee to travel overseas. It's an offence to travel overseas without consent in writing. Your trustee may ask for further details to consider your request.
Your name will permanently appear on the National Personal Insolvency Index (NPII)
The National Personal Insolvency Index is a searchable public register listing insolvency proceedings in Australia.
For more information see: Who will know I’m bankrupt?
Bankruptcy can affect your ability to obtain future credit
If you apply for credit over a set amount, you must inform the credit provider of your bankruptcy. Credit reporting agencies keep a record of your bankruptcy for:
- 5 years from the date you became bankrupt or
- 2 years from when your bankruptcy ends, whichever is later.
For more information see: Who will know I'm bankrupt?
Your trustee may sell your assets
You are able to keep:
- ordinary household goods
- tools up to a set amount used to earn an income and
- vehicle(s) with a value up to a set amount.
Your trustee can sell other assets including your house and property. You must not dispose of any property belonging to the trustee. You must declare any assets you have when you apply for bankruptcy and any you receive during bankruptcy.
For more information about which assets a trustee can claim see: Assets that can be taken or sold
You may lose the right to take or continue legal action
If you're involved in any legal action, you need to inform your trustee. If you have a pending court case, you should contact the court to confirm whether you must still attend. Contact the Commonwealth courts.
Bankruptcy normally lasts for 3 years and 1 day from the day we accept your Bankruptcy Form
Your bankruptcy period starts from the day we accept your bankruptcy application. If a creditor makes you bankrupt, the bankruptcy period starts from the date you file a statement of affairs that we accept. In some cases, your trustee can lodge an objection to extend the bankruptcy for up to eight years.
For more information see When will my bankruptcy end?