What is temporary debt protection (TDP)?

Find out more about temporary debt protection, it’s consequences and where to get help to decide if it’s right for you.

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What is temporary debt protection?

If you’re in financial difficulty, a temporary debt protection (TPD), gives you a 21-day protection period where unsecured creditors can’t take enforcement action, such as a sheriff seizing your goods or garnishing your wages.

If you want to apply for bankruptcy, you do not need to apply for temporary debt protection first.

Important information

Applying for temporary debt protection, (also known as a Declaration of intention to present a debtor's petition), is considered an act of bankruptcy.

This means it could potentially be used by a creditor to make you bankrupt, so make sure you get advice from a financial counsellor first to make sure it's right for you.

Before you apply for temporary debt protection

Speak to a financial counsellor to understand the consequences

It’s important to speak to a financial counsellor before you apply for temporary debt protection. They can provide advice about your financial situation and recommend the best option for you to deal with unmanageable debt.

To speak with a free financial counsellor, contact the National Debt Helpline online or call 1800 007 007.

For more information on financial counsellors and other support services see Where to find help managing debts.

What happens when you apply for temporary debt protection?

You receive a 21 day protection period

Once we accept your application, temporary debt protection provides a 21-day protection period in which unsecured creditors (including sheriffs) can’t take enforcement action to recover money you owe them.

This means they can’t garnish your wages or have the sheriff/bailiff seize your goods.

You can use this time to:

  • negotiate a payment plan with your creditors (you can do this yourself or authorise someone else to negotiate on your behalf)
  • consider if any of the formal insolvency options are right for you and gather the information needed for apply.

Once your temporary debt protection is accepted, you cannot apply for temporary debt protection again for 12 months.

What a temporary debt protection will not do

Doesn’t stop secured creditors

Secured creditors can still repossess any assets they hold a security over (such as a house under mortgage) if you can’t make repayments.

Doesn’t cover all debts

Temporary debt protection does not apply to some types of debt. These include child support, HELP debts, and fines imposed by a court.

Doesn’t prevent creditors from seeking payments

Temporary debt protection doesn’t stop your creditors from contacting you to seek payment for your debts. Creditors can also take – or continue – legal action to recover the debt.

Consequences of temporary debt protection

It's a serious step to apply for temporary debt protection, which is also known as a Declaration of intention to present a debtor’s petition. It’s important to understand how the consequences will impact you if you proceed.

Creditors can use it to make you bankrupt

Temporary debt protection is an ‘act of bankruptcy’. This means a creditor could use the fact you have lodged a temporary debt protection as the basis for an application to the court to make you bankrupt.

It doesn’t stop your creditors from lodging a creditor’s petition with the court to make you bankrupt.

If you need to appear in court and are unsure if you should attend, contact the court. For more information about legal assistance see Seek legal assistance.

It is not recorded on the public register of personal insolvencies

The details of your temporary debt protection do not appear on the National Personal Insolvency Index (NPII).

Who can apply for temporary debt protection (TDP)

You can apply for temporary debt protection if you have debts you can’t pay. Usually people apply for temporary debt protection if unsecured creditors are taking enforcement action.

Some people are not eligible for temporary debt protection. This includes people who:

  • have had a temporary debt protection accepted in the last 12 months
  • are currently in an active debt agreement or personal insolvency agreement
  • have been served with a Creditor’s Petition that has been filed in the court.

What happens when you enter a temporary debt protection?

If you lodge a temporary debt protection application, your 21-day protection period starts from when we accept your application.

When we accept your temporary debt protection application, your creditors are:

  • notified by us of the 21-day protection period
  • unable to enforce recovery of unsecured debts for 21 days – this includes garnishing of wages and seizing property
  • able to start or continue legal action but can't take enforcement action to recover the debt
  • able to continue recovery for a secured debt – for example, house or car.

After 21 days you are not automatically bankrupt, and creditors can again resume trying to recover their debts.

How do I apply for temporary debt protection?

Once you have spoken with a financial counsellor to understand the consequences of proceeding with temporary debt protection, you can apply by lodging a temporary debt protection form.

Lodge a temporary debt protection form

Temporary relief from enforcement action by a creditor

Julia is a small business owner who runs a café. The café has been hit hard by the economic impact of the coronavirus. Until recently, Julia had always been able to make on-time payments to creditors, like the bank and suppliers.

Like most cafés across Australia, Julia's has only been able to sell takeaway coffee and food. The cafe's revenue has more than halved and Julia has been unable to pay any creditors.

Most of Julia's creditors have been supportive and negotiated new payment terms . However, one creditor didn't and instead obtained a court judgment against them.

The court's judgment allows a creditor to apply for enforcement processes for the judgment debt, which could mean Julia's assets are seized and sold to pay off their debts.

Julia contacted the National Debt Helpline for free financial counselling.

After speaking with the financial counsellor, Julia decided to apply for Temporary Debt Protection. Once the application was accepted, this stopped the creditor from enforcing the judgment – meaning Julia's assets weren't seized – for a period of 21 days.

Julia used the extra time during the temporary debt protection period to restructure their finances and enter an affordable repayment plan with the creditor.

Important: AFSA encourages anyone considering entering into Temporary Debt Protection to first seek advice from a free financial counsellor by calling the National Debt Helpline on 1800 007 007.

Note: These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.

Temporary debt relief during COVID-19

Mohammed is an aspiring DJ in the Sydney CBD, who is frustrated that COVID-19 has stopped them from being able to DJ in the city's nightclubs.

Mohammed had racked up $80,000 in credit card debt in the 6 months prior to COVID-19, buying all the latest equipment to support their upcoming gigs in some of Sydney's brightest night spots.

This has now all dried up since the virus took hold. Mohammed's credit card debt is increasing everyday with interest – and the only work they can get is driving their aunt's taxi a couple of days a week.

While the banks have been understanding and not pursued payment for now, the simple fact is that Mohammed's debts are getting higher every day without any reasonable income to be able to reduce them.

A few of the other creditors have not been as flexible as the banks - they are telling Mohammed they need the money just as badly, so they are trying to get the money by taking Mohammed to court.

Mohammed was particularly worried their state-of-the-art speakers were at risk of being repossessed. The court's judgment would normally mean that a Sheriff would be able to seize some of their assets and sell them – with the money going toward paying off Mohammed's debts.

Mohammed was talking about this with a passenger, Manpreet, who listened with interest and could relate to Mohammed's circumstances. Having recently been through it themself, Manpreet was able to suggest to Mohammed to ring the National Debt Helpline for free financial counselling.

After speaking with a financial counsellor, Mohammed decided to apply for temporary debt protection. When the application was accepted, this stopped Mohammed's creditors from enforcing the judgment – meaning no assets were seized – for a period of 21 days, giving Mohammed time to find other work.

Important information

Temporary Debt Protection is an act of bankruptcy. It can be used as a reason for a creditor to file a petition with the courts to have the debtor made bankrupt. For more information see Temporary Debt Protection.

AFSA encourages anyone considering entering into temporary debt protection to first seek advice from a free financial counsellor by calling the National Debt Helpline on 1800 007 007.

Note: These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.

What are my options? Consequences of temporary debt protection (TDP) Lodge a temporary debt protection (TDP) form Temporary debt protection