Consequences of bankruptcy

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Understand the consequences of bankruptcy

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.

Check how bankruptcy may affect me - online tool

Before you apply for bankruptcy, it's important to understand the consequences of bankruptcy so you know if it is the right decision for you.

The answers in the interactive tool below will give you an idea of what to expect. 

This tool does not cover every situation that may be impacting you specifically. If you want to discuss your circumstances, you can speak to a financial counsellor. For more information see Where to find help managing debts

Check how bankruptcy may affect me online tool

Video: Consequences of bankruptcy

Seek help

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

For more information see Personal bankruptcy and the liquidation of a company

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.

Case study: Alisha

During bankruptcy - travel

Alisha is a 39-year-old real estate agent and mother from Western Australia. Alisha works part-time and rents a house in Perth with her partner.

Alisha was the higher income earner in her household, but when she went on maternity leave, her family struggled to keep up with their living expenses. She began relying on credit cards.

Alisha’s debt spiralled, and even when she returned to work part-time, she was unable to maintain the repayments. Alisha applied for bankruptcy. Her trustee is the Official Trustee (AFSA).

In the second year of her bankruptcy, Alisha needed to travel to New Zealand to attend a conference for work. During bankruptcy, you must get permission from your trustee to travel overseas.

Alisha went onto the AFSA website, completed the travel form, and paid the fee. AFSA assessed Alisha’s application and sent her a letter confirming she had permission to travel. Alisha carried the letter with her when she travelled to New Zealand.

*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.

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 propertyYou 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?