Becoming bankrupt doesn't normally prevent you from working, but it could have an impact on your income and employment. This page helps you to understand how it could affect you.
One of your obligations when bankrupt is to keep your trustee informed of any changes in your income or employment. For example, if you:
- change jobs
- receive higher or lower income (including government assistance)
- stop working.
For more information about how bankruptcy may affect your employment see: Employment restrictions
How much can I earn?
There is no limit to the amount of income that you can earn while you're bankrupt. There is also no limit to the amount you can save during your bankruptcy. However, if your after-tax income exceeds a set amount, you may have to make compulsory payments[?]. This amount changes with how many dependants you have.
What are contributions?
If your trustee determines you are earning over the income set amount, they'll ask you to pay income contributions[?]. Contributions is the word we often use for compulsory payments from your income.
Your trustee can use these contributions to help repay your debts. Your trustee will notify you how and when you need to make payments. Compulsory income payments are:
- 50% of the amount you earn above the income threshold (set amount).
- Paid by you to your trustee, and may go towards your creditors.
- Calculated by your trustee to determine the amount you need to pay, if any.
If you have any enquiries about these payments, contact your trustee.
For more information see: Official Trustee Practice Statement OTPS1- Income contributions.
Estimate income contributions
Use our income contributions calculator to estimate the annual contribution you may need to pay under bankruptcy
Can I save money?
Funds you have in your account on the date of bankruptcy can become the trustee’s. Normally, you can save during bankruptcy if you keep your savings in an ordinary savings account.
If you place money in a term deposit account or purchase an asset, the cash has changed in nature. Therefore your trustee can claim it to help repay your debts.
Government assistance
Can I apply for government student loans?
Yes. If you apply for credit over a set amount, you need to disclose that you are bankrupt. Contact Study Assist to confirm your eligibility.
Will bankruptcy affect my family tax benefits?
No, they don't form part of your income assessment for compulsory payments.
Can I apply for Centrelink?
Yes. Contact Centrelink directly to confirm your eligibility.
Is my spouse's income affected?
The trustee can only use your income to assess whether you need to make compulsory payments.
Can I keep my job if I'm bankrupt?
Bankruptcy doesn't stop you from working and normally we won't tell your employer you are bankrupt. However there are some restrictions to be aware of:
- Some professional or licencing bodies impose restrictions in some trades or professions. Contact them directly to ask if restrictions apply.
- There may be limitations to operating as a sole trader.
- You can't manage a trust account e.g. as a solicitor or accountant.
- You can’t be a director of a company or manage a company unless you have the permission of the court.
- You may not be able to hold certain public positions (e.g. senator or member of parliament).
Common professions that bankruptcy may affect are listed under employment restrictions.
Can I still be director of a company?
Not during bankruptcy. You are also unable to manage a company unless you have the permission of a court. For further company related enquiries, contact the Australian Securities Investment Commission (ASIC) at asic.gov.au.
Can I run my own business?
Yes, however there may be restrictions. If you're a sole trader, it's your responsibility to make sure you fulfil your bankruptcy obligations.
Your business name should contain your full name. This allows people to search for your name on the National Personal Insolvency Index (NPII)[?] if they choose.
If your business name doesn't contain your full name, you must tell all people you do business with that you're bankrupt.
For example: David Smith is currently bankrupt. He has a sole trader business as a plumber. If his business name is 'Dave’s Speedy Plumbing', he must inform his clients that he's bankrupt. If his business name is 'David Smith Plumbing', he wouldn't need to inform anyone because it contains his full name.
Discuss this further with your trustee if you're unsure of your obligations.
Direct queries regarding your Australian Business Number (ABN) to the Australian Taxation Office (ATO).
If you have another type of company (ending in Pty Ltd) contact ASIC.