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Debts overview table
The tables below compare how bankruptcy and debt agreements treat different secured and unsecured debts. These relate to debts that were not incurred by fraud and that existed at the start date of your bankruptcy or debt agreement.
| Bankruptcy | Debt agreements | Personal insolvency agreements | |
|---|---|---|---|
| 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. |
Unsecured debts
The table below shows how different types of unsecured debts are treated in bankruptcy or a debt agreement. An unsecured debt is not tied to specific property, like a house.
For more information see What happens to my debts in bankruptcy? or What debts does a debt agreement cover?
| Type of debt (unsecured) | Can the creditor continue to demand payment? | Will I still have to pay the debt after my bankruptcy ends? | Will the debt be included in my debt agreement? | Can the creditor continue to demand payment? | Will I still have to pay the debt after my debt agreement? |
|---|---|---|---|---|---|
| If I go bankrupt: | If I enter into a debt agreement: | ||||
| Credit card | No | No | Yes | No | No |
| Store card | No | No | Yes | No | No |
| Personal loan (unsecured) | No | No | Yes | No | No |
| Unsecured business loan | No | No | Yes | No | No |
| Trade creditor (unsecured / no retention of title) | No | No | Yes | No | No |
| Gas, electricity, phone (including mobile), internet, pay-TV | No | No, but the supplier may no longer supply you or may require payment of a bond | Yes | Yes regarding ongoing supply but no regarding the debt covered by your debt agreement | No, but the supplier may no longer supply you or may require payment of a bond |
| Legal fees | No | No | Yes | No | No |
| Medical fees | No | No | Yes | No | No |
| Accounting fees | No | No | Yes | No | No |
| State fines | It depends on where the fine was incurred, as different States and Territories have different legislation | It depends on where the fine was incurred, as different States and Territories have different legislation | No | Yes | Yes |
| Non-court fines | Yes | No | No | Yes | Yes |
| Court-ordered restitution amounts | No | No, if the amount was fixed before you became bankrupt | Yes, if the amount was fixed before you entered into a debt agreement; no if it was not fixed | No, if the amount was fixed before you entered into a debt agreement; yes if it was not fixed | No, if the amount was fixed before you entered into a debt agreement; yes if it was not fixed |
| Pawn shop | No | No, but you won't get back the item/s you pawned | Yes | No | No, but you won't get back the item/s you pawned |
| Pay day lender | No | No | Yes | No | No |
| Taxation | No | No, but deductions from wages may continue during the term of and after bankruptcy if required by certain statutory orders, such as those issued by the Commissioner of Taxation, as these constitute the recovery of a secured debt | Yes | No | No, but deductions from wages may continue during the term of and after the debt agreement if required by certain statutory orders, such as those issued by the Commissioner of Taxation, as these constitute the recovery of a secured debt |
| Child support | Yes | Yes | Yes* | Yes | Yes |
| Victims of crime** | See below** | See below** | See below** | See below** | See below** |
| Centrelink | No | It can depend on the type of debt and/or when a reconciliation is conducted | Yes | No, but if Centrelink debts are incurred by fraud then the debt will be repayable after discharge | No |
| Centrelink Families Assistance | No, except where the reconciliation of family assistance payment is carried out after the date of bankruptcy. | No, except where the reconciliation of family assistance payment is carried out after the date of bankruptcy. | Yes, except where the reconciliation of family assistance payment is carried out after the date of debt agreement proposal. | No, except where the reconciliation of family assistance payment is carried out after the date of debt agreement proposal. | No, except where the reconciliation of family assistance payment is carried out after the date of debt agreement proposal. |
| Outstanding rent where you currently live | No | No. Your rental agreement or local laws may give the landlord the right to terminate your tenancy agreement and you may have to find another place to live | Yes | No | No. Your rental agreement or local laws may give the landlord the right to terminate your tenancy agreement and you may have to find another place to live |
| Outstanding rent at a place where you used to live | No | No | Yes | No | No |
| Debts relating to property you damaged when you were a tenant | No | No | Yes | No | No |
| Overdrawn accounts | No | No | Yes | No | No |
| HECS/HELP/SFSS debts | Yes | Yes | No | Yes | Yes |
| Liquidated debts / liquidated damages | No | No | Yes | No | No |
| Unliquidated debts / unliquidated damages | Yes | Yes, except where the debt is incurred by reason of a contract, promise or breach of trust. | No, except where the debt is incurred by reason of a contract, promise or breach of trust. | Yes, except where the debt is incurred by reason of a contract, promise or breach of trust. | Yes, except where the debt is incurred by reason of a contract, promise or breach of trust. |
| Debts incurred after your date of bankruptcy or date of debt agreement | Yes | Yes | No | Yes | Yes |
| Provable debts incurred by fraud | No | Yes | Yes | No | Yes |
* However, the Child Support Registrar (Registrar) will not participate in the voting process for a debt agreement. A debt agreement does not prevent the Registrar from taking any recovery action against your property for child support debts and child or spousal maintenance, that are registered under the Child Support (Registration and Collection) Act.
The way child support debts are recorded in a debt agreement proposal depends on whether you have overdue child support and what recovery action the Registrar has taken as at filing date of the debt agreement proposal:
- If you are required to make ongoing payments but do not have overdue child support, the child support payments should be recorded as an expense under Child support and maintenance in section L of the explanatory statement.
- If you have overdue child support and the Registrar has taken enforcement action by making deductions from your salary or wages, the child support payments should be recorded under Payments to creditors not receiving a dividend by law in the debt agreement in section L, and the full amount of child support debt should be recorded in section E of the explanatory statement.
- If you have overdue child support and the Registrar has not taken any enforcement action, the full amount of child support debt should be recorded in section D of the explanatory statement. It is recommended that you contact the Registrar to query if any enforcement action will be taken if a debt agreement is made, as any future recovery action will affect the affordability of the proposal.
A Registered Debt Agreement Administrator can provide you with further guidance on the treatment of child support debts in a debt agreement.
**Victims of Crime debt information depends on factors such as your state's laws and when or if the debt was registered. Contact us for further information.
Secured debts
The table below shows how different types of secured debts are treated in bankruptcy or a debt agreement. A secured debt is tied to specific property, like a house. The creditor has the right to take possession of your property if you don’t make the payments.
If you have a secured debt and want to keep that item, for example a car under finance, you will still have to pay that debt. You need to contact your secured creditors to discuss your intentions with the debt. If you’re unable to maintain the payments, you may be able to surrender the goods.
Sometimes the creditor may sell the goods, however it still doesn't cover what you owe. We call this a shortfall. For more information about what happens if you have a shortfall see What happens to my debts in bankruptcy? and What debts does a debt agreement cover?
| Type of debt (secured) | Can the creditor continue to demand payment? | Will I still have to pay the debt after my bankruptcy ends? | Will the debt be included in my debt agreement? | Can the creditor continue to demand payment? | Will I still have to pay the debt after my debt agreement? |
|---|---|---|---|---|---|
| If I go bankrupt: | If I enter into a debt agreement: | ||||
| House mortgage | Yes | Yes, you will need to pay the debt, or the secured creditor may sell your house. It is most likely that either the trustee or mortgagee will sell your house. | You must disclose the creditor and the creditor can decide whether to participate | Yes | Yes, if you wish to keep the house |
| Motor vehicle security | Yes | Yes, you will need to pay the debt, or the secured creditor may repossess your vehicle. You may also have to surrender your vehicle if you fall into arrears. | You must disclose the creditor and the creditor can decide whether to participate | Yes | Yes, if you wish to keep the car |
| Business loans secured by business assets | Yes | Yes, you will need to pay the debt or the secured creditor may sell the assets | You must disclose the creditor and the creditor can decide whether to participate | Yes | Yes, if you wish to keep the assets |
| Chattel mortgage | Yes | Yes, you will need to pay the debt or the secured creditor may sell the assets | You must disclose the creditor and the creditor can decide whether to participate | Yes | Yes, if you wish to keep the assets |
| Council rates | Yes | Yes, you will need to pay the debt or the Council can sell your house to pay the debt | No | Yes | You will need to pay the debt or the Council can sell your house to pay the debt |
| Water rates | Yes | Yes, you will need to pay the debt or the Council can sell your house to pay the debt | No | Yes | You will need to pay the debt or the Council can sell your house to pay the debt |
| Debts incurred after your date of bankruptcy or date of debt agreement | Yes | Yes | No | Yes | Yes |
| Secured debts incurred by fraud | Yes | Yes | No | Yes | Yes |
This publication is a guide intended to provide general information and is not legal advice.