Compare your insolvency options

You may have unmanageable debt and need help to work out what to do. The earlier you seek help with your debt, the more informed you’ll be about your options and gain control of your situation.

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Your insolvency options

Formal options under the Bankruptcy Act 1966

There are four formal options available to you under the Bankruptcy Act 1966, each having serious consequences. We encourage you to read the following and seek your own independent advice before making a decision.

Temporary debt protection (TDP)

This option provides you with a 21 day protection period from being pursued by unsecured creditors while you seek help and decide how to proceed.

Debt agreements

These are binding agreements between you and your creditors to pay a sum you can afford.

Personal insolvency agreements

These are agreements between you and your creditors to pay an agreed amount in instalments or lump sum.

Bankruptcy

Lasts for at least 3 years and 1 day. At the end of this period you are released from most of your debts.

Compare your options

Use this tool to help you find the formal insolvency options you're eligible for if you can't pay your debts.

Time to complete: 3 mins

Check my eligibility

Other informal options

If you're having difficulty making your repayments you may want to try to reach an agreement with your creditors. Your creditors may be willing to:

· give you more time to pay your debts

· give you a lower interest rate

· charge you fewer penalties.

You may also be able to apply for a hardship variation with your creditor if you're experiencing financial hardship. For more information on negotiating with your creditors see Dealing with debt.

Help and advice

You can get help from a free financial counsellor by contacting the National Debt Helpline on 1800 007 007. Financial counsellors offer free, independent and confidential services to discuss your situation and help you get back on track.

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

At AFSA, we manage the bankruptcy of individuals. If you need information about an insolvent company, contact the Australian Securities & Investments Commission (ASIC). Separating with debt: a guide to your legal options is a free guide available on the Attorney-General's Departments website, with practical information and options to assist separating couples to proactively manage debts in the context of a relationship breakdown.

Can a creditor make me bankrupt?

It's also possible that a creditor can make you bankrupt. One of the first steps is to serve you with a bankruptcy notice. For more information see I've been served with a bankruptcy notice.

Detailed insolvency options comparison

Please look at the following tables to compare your options when it comes to bankruptcy, debt agreements and personal insolvency agreements.

Eligibility
   Bankruptcy  Debt agreement  Personal insolvency agreement 
Australian connection  Must have a residential or business connection.  No residential or business connection required.  Must have residential or business connection. 
Previous insolvency  While previous insolvency does not by itself make a person ineligible, the Official Receiver may not accept the petition if the debtor was previously bankrupt and some other conditions are met.  Must not have been a bankrupt, proposed a personal insolvency agreement or made a debt agreement in the previous 10 years.  Must not have proposed another personal insolvency agreement in the previous six months. 
Income threshold  No  Yes, see Indexed amounts.  No 
Asset threshold  No  Yes, see Indexed amounts.  No 
Debt threshold  No  Yes, see Indexed amounts.  No 
Income, employment and trade
   Bankruptcy  Debt agreement  Personal insolvency agreement 
Payments from income required?  Yes, mandatory payments required if income exceeds a statutory threshold. See Indexed amounts.  Yes, if the terms of the agreement require payments from income – this occurs in most cases.  Only if the terms of the agreement require payments from income. 
Ability to continue to operate a business 

It depends on the nature of the business and if the trustee sells the business assets. Key points include: 

  • when a partner becomes bankrupt it dissolves an existing partnership 
  • if trading under a business or assumed name after the date of bankruptcy, a bankrupt must disclose their bankruptcy to people dealing with the business. This includes bankrupts trading alone or jointly. 
 Yes, unless terms of the agreement provide otherwise. If you trade under a business name or assumed name (whether alone or in partnership) the debt agreement must be disclosed to everyone you do business with.   Yes, if agreement allows for debtor to continue to operate the business. 
Ability to be a director of, or otherwise manage, a corporation  No  Yes  Not until terms of agreement fully complied with. 
Other employment restrictions  Professional bodies and/or trade associations may have certain conditions of membership for the duration of the bankruptcy. There may be restrictions on holding some statutory positions during the period of bankruptcy.  Professional bodies and/or trade associations may have certain conditions of membership that could affect you while the agreement is in place. There may be restrictions on holding some statutory positions during the period of the agreement.  Professional bodies and/or trade associations may have certain conditions of membership for the duration of the agreement. There may be restrictions on holding some statutory positions during the period of the agreement. 
Assets
   Bankruptcy  Debt agreement  Personal insolvency agreement 
Ability to retain assets  No, unless it is exempt property (for example, household furniture, tools of trade up to a certain value).  Yes, unless terms of the agreement provide otherwise.  Yes, subject to the terms of the agreement. 
Ability to retain assets acquired during the period of the agreement/ bankruptcy  No, unless property being acquired is exempt property.  Yes  Yes 
Can assets previously sold or transferred for less than market value be recovered?  Yes, subject to certain statutory conditions being met.  No  Not unless the agreement specifies that the antecedent transaction provisions of the Bankruptcy Act apply to the debtor. 
Can payments made to creditors prior to the agreement/ bankruptcy be recovered?  Yes, subject to certain statutory conditions being met.  No  Not unless the agreement specifies that the antecedent transaction provisions of the Bankruptcy Act apply to the debtor. 
Restrictions
   Bankruptcy  Debt agreement  Personal insolvency agreement 
Ability to travel overseas  Prior consent of trustee required. A fee is payable where the trustee is the Official Trustee.  No statutory restriction.  No statutory restriction. 
Ability to travel within Australia  No statutory restriction.  No statutory restriction.  No statutory restriction. 
Incurring further debt  Must disclose insolvency if incurring debt or obtaining goods and services in excess of a threshold. See Indexed amounts.  Must disclose the debt agreement if incurring debt or obtaining goods and services in excess of a threshold. See Indexed amounts.  No statutory restriction. 
Fees and charges
   Bankruptcy  Debt agreements  Personal insolvency agreements 
Statutory filing fee  No.  Yes (see Fees and charges).  Yes (see Fees and charges). 
Statutory levies  A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government. (See Fees and charges).  A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government. (See Fees and charges).  A government levy is imposed on all receipts in the administration. Any interest earned on these receipts is also paid to government. (See Fees and charges). 
Fees for administration of the estate/s  Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General. 
Note: Official Trustee’s fees are set by statute. (See Fees and charges). 		 Subject to creditor approval. 
 
Note: Official Trustee’s fees are set by statute. (See Fees and charges). 		 Subject to creditor approval. Fees can be reviewed upon application to the Inspector-General. 
Note: Official Trustee’s fees are set by statute. (See Fees and charges). 

This publication is a guide intended to provide general information and is not legal advice.

Debts

See an overview of how debts are treated in general in the formal insolvency options in the table below. 

For a more detailed breakdown of how different secured and unsecured debts are treated in a debt agreement and bankruptcy see Debt comparison table. 

Debts overview table

   Bankruptcy  Debt agreement  Personal insolvency agreement 
Unsecured debts Unsecured creditors receive pro rata payment from funds recovered by the trustee after fees and costs have been deducted. There are some statutory priority payments to particular classes of creditors like employees. All unsecured creditors receive pro rata payments. Unsecured creditors can receive differential payment rates if the terms of the agreement provide for this. There are some statutory priority payments to particular classes of creditors like employees.
Secured debts Rights of secured creditors are not affected. They can repossess assets if there is default in payment. Rights of secured creditors are not affected. They can repossess assets if there is default in payment. Rights of secured creditors are not affected. They can repossess assets if there is default in payment.
Release from debts Upon discharge from bankruptcy, but not released from some types of debts. Upon completing terms of agreement, but not released from some types of debts. As per terms of the agreement, but not released from some types of debt.