My business has unmanageable debt
As a business owner, unmanageable business debt can affect your personal finances.
Personal insolvency means that a person is unable to pay their debts when they are due. This is important for business owners because many small businesses have finances closely tied to the owner's personal finances.
If your business cannot pay its debts, you may be liable for the debts when:
- you operate as a sole trader or partnership
- you have given a personal guarantee for a business loan or line of credit
- you are a director of a company and have become personally liable for some of your business debts (for example, unpaid tax, superannuation, or a Director Penalty Notice from the Australian Taxation Office).
Personal insolvency doesn't just impact you – it can impact your business, your business partners, your employees, your future options and your spouse or de facto partner.
Seek help – contact a free financial counsellor
Financial counsellors can help you work through your business's money problems and understand your options to prepare a path forward.
Learn more about small business debt support.
What are my insolvency options
Personal insolvency options
When business debts affect your personal finances and you cannot repay them, you may need to consider personal insolvency options such as bankruptcy.
During bankruptcy your personal assets (such as your home or personal savings) and your business assets (such as vehicles or stock) may be used to pay off the debts.
There are other personal insolvency options available to you under the Bankruptcy Act 1966. They each have different outcomes and all are an 'act of bankruptcy'.
Corporate insolvency options
If you are a director of a company and your business cannot pay its debts, you may need to look at corporate insolvency options. The Australian Securities and Investments Commission (ASIC) regulates corporate insolvency and oversees processes that affect companies, including small businesses.
Common corporate insolvency options include:
- restructuring
- voluntary administration
- liquidation.
Find out more in ASIC's insolvency for directors.
Seek independent advice
Personal insolvency options can affect how you run your business. Make sure you understand them and seek independent advice from a professional advisor.
Other business debt situations you may face
My customer owes me money
If you are owed money, there are formal ways to demand payment. Before taking formal action, try to speak with the person who owes you money about an informal payment agreement.
If a person owes you or your business $10,000 or more, you may be able to apply to the court to make them bankrupt. This is called a creditor's petition.
I've received a temporary debt protection notice
Temporary debt protection provides a 21-day protection period for people with unmanageable debt. This gives the person time to consider all their options and discuss alternative arrangements with their creditors. You must wait until this 21-day period ends before pursuing debt repayments.
I've been given bad advice
Be aware of the risks of untrustworthy advice when you are facing financial problems. If you are concerned that someone may be doing the wrong thing, you can tell us about it.
Report any concerns about potential dodgy behaviour or suspicious activities to AFSA via the online tip-off service.
For help you can trust, contact the Small Business Debt Helpline on 1800 413 828.