What is bankruptcy?

Bankruptcy is a legal process where you're declared unable to pay your debts. It can release you from most debts, provide relief and allow you to make a fresh start.

You can enter into voluntary bankruptcy. To do this you need to complete and submit a Bankruptcy Form. It's also possible that someone you owe money to (a creditor) can make you bankrupt through a court process. We refer to this as a sequestration order.

Bankruptcy normally lasts for 3 years and 1 day.

At AFSA, we manage the bankruptcy of individuals. If you need information about an insolvent company, contact the Australian Securities Investments Commission (ASIC).

Bankruptcy trustee

When you become bankrupt we appoint a trustee. A trustee is a person or body who manages your bankruptcy.

This can either be the Official Trustee (AFSA) or a registered trustee[?]. You can also nominate a registered trustee of your choice.

Your obligations

When you are bankrupt:

  • You must provide details of your debts, income and assets to your trustee.
  • Your trustee notifies your creditors that you’re bankrupt - this prevents most creditors from contacting you about your debt.
  • Your trustee can sell certain assets to help pay your debts.
  • You may need to make compulsory payments[?] if your income exceeds a set amount.

Before entering bankruptcy

Seek help

Financial counsellors can help you and are available in every state and territory. Their services are free, independent and confidential. They can provide help with your financial situation and talk about your options to deal 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.

Know your options

Bankruptcy is just one formal option available under the Bankruptcy Act[?]  to manage your debt. Other formal options include temporary debt protection for 21 days reprieve from creditors enforcing a judgment against you, a debt agreement or a personal insolvency agreement.

For more information see What are my options?

Understand the consequences of bankruptcy

Bankruptcy may have a serious impact on you. It may affect your ability to get credit, travel overseas or gain some types of employment.

For more information see Consequences of bankruptcy.

Case study: Mei Ling and Matt

A fresh start after bankruptcy

Bankruptcy is not the right option for everyone but for Mei Ling and Matt, it provided a way out of their debt crisis. 

Read more about their story