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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
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 they agree, you must file a signed consent to act with the Bankruptcy form. If a registered trustee does not provide their consent to act, then your estate will initially be administered by the Official Trustee (AFSA). The trustee can change at any point during your bankruptcy.
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.
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
Bankruptcy can impact any legal matters
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.
Family law court matters
If you are considering entering bankruptcy, you should obtain independent legal advice if you are also considering separating from your partner, or you are already involved in a family law matter.
Bankruptcy may have a significant impact on a family law property matter because:
- You may not be able to commence a family law matter.
- You may lose the ability to have a say about what happens to your property. If a family law matter is underway, the trustee may become a party to the proceedings, and you may not be able to make submissions to the court about your property that has been vested in the trustee.
- In a family law property proceeding, the family courts will determine the property interests of any creditors and the non-bankrupt spouse, with no party having priority, and may order the transfer of vested property to the non-bankrupt party.
If you are currently bankrupt or in a personal insolvency agreement, you must notify the family courts and your trustee if you become involved in family law property proceedings.
Economic or financial abuse
Family courts can consider the economic impact of family violence when determining a property or financial settlement. Economic or financial abuse is a form of family violence and includes where a person has forcibly controlled the money or assets, forced a person to take on a liability, or accumulated a debt in their partner’s name without their knowledge.
The Attorney-General's Department has published 2 resources to support individuals to understand their options for resolving their family law property disputes. These are available at:
- Separating with debt: a guide to your legal options
- A guide to dividing your property and finances after separation.
You can also find information about family law and bankruptcy by visiting the Federal Circuit and Family Court of Australia. If you are in Western Australia, the law may be different and you should speak to a lawyer.
Information about family violence support and legal services is available at Family Law Services and Support Fact Sheet | Attorney-General's Department.
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 8 years.
For more information see When will my bankruptcy end?
