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Important steps to take when a creditor makes you bankrupt
If a court issues a 'sequestration order' against you, this means you are ‘bankrupt’. A trustee will also have been appointed to manage your bankruptcy. Once this happens, it is important that you understand your obligations and the consequences of bankruptcy.
Read below for your important next steps.
Step 1: Submit a Statement of Affairs form
After being made bankrupt by the court, you must complete and submit a Statement of Affairs form with the Official Receiver (AFSA) and with your trustee. This must be done within 14 days of the date you were advised of your bankruptcy.
You can submit this online by creating an Online Services account using Digital ID or by creating an AFSA account. It may take you about 30 to 60 mins to create your account and complete your Statement of Affairs form online.
Once you have logged in, you will be taken to your dashboard. From here:
- Select 'Start bankruptcy forms'
- At the question 'Has someone made you bankrupt through a court order', select 'Yes'. Your response to this question will determine which forms you need to complete.
Do NOT submit a Debtor's Petition form. The debtor's petition is only for applicants voluntarily applying for bankruptcy.
For help setting up an account, see Get help with creating an Online Services account.
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If you are unable to complete the online proof of identity check, or unable to complete the application online, you can download and submit your Statement of Affairs to AFSA via email or post. To download the form, see Bankruptcy by sequestration order forms.
You can also request a copy of the form from your trustee.
For more information on completing your form offline, see Submitting a bankruptcy application offline.
Getting help to complete your Statement of Affairs form
If you need help with completing your Statement of Affairs form, you can talk to a free financial counsellor, registered trustee or other service provider. Financial counsellors are available nationwide and provide an independent, free, and confidential service.
For more information on financial counsellors and other support services, see Where to find help.
Step 2: Contact your trustee
When you become bankrupt, a trustee is appointed to manage your bankruptcy.
It's important to contact your trustee as early as possible. They will help you understand how bankruptcy affects you, and your obligations and responsibilities during bankruptcy. They will work with you, and your creditors, to achieve a fair and reasonable outcome for all.
During bankruptcy you have an obligation to provide your Statement of Affairs and information to your trustee, and tell your trustee when your circumstances change. This may involve supplying books, bank statements and other documents the trustee asks you to provide.
The creditor who made you bankrupt may nominate a registered trustee to manage your bankruptcy. If they don't, the Official Trustee (AFSA) will become your trustee by default. In some cases, the Official Trustee may transfer the administration of your estate to a registered trustee.
If you're not sure who your trustee is, contact us for assistance.
If you have concerns about an action taken by your trustee, you can make a complaint or provide feedback to AFSA.
What happens next?
Once you've submitted your Statement of Affairs form, we will respond to you within 14 days.
Note: You must also provide a copy of your completed Statement of Affairs to your bankruptcy trustee.
Important: Failing to file a Statement of Affairs is an offence under the Bankruptcy Act 1966 and may be referred to the Commonwealth Director of Public Prosecutions for prosecution.
Understand the consequences of bankruptcy and your obligations
It's important that you understand the consequences of bankruptcy and your obligations. Failure to comply with your responsibilities may result in penalties for non-compliance.
Consequences of bankruptcy
There are serious consequences to bankruptcy, such as:
- limited ability to obtain credit
- possible sale of some of your assets by your trustee
- permanent record of your bankruptcy on a publicly accessible register called the National Personal Insolvency Index (NPII).
When you become bankrupt, your name and other details will appear on the NPII. If publishing certain information would/is likely to put your safety at risk, you can apply to have certain information removed from the NPII. Your name and date of birth cannot be removed. Your request must be submitted at the same time as your Statement of Affairs form.
For information on how to make this request, see Can I withhold my details that appear on the National Personal Insolvency Index?
Learn more about the consequences of bankruptcy and how you may be affected.
Your obligations and restrictions during bankruptcy
During bankruptcy you have certain obligations and may face some restrictions. It is your responsibility to provide information and tell your trustee when your circumstances change.
Learn more about your responsibilities during bankruptcy at What are my obligations?
Penalties may apply for non-compliance
There may be penalties if you don't comply with your obligations and restrictions. In some cases, your trustee may extend your bankruptcy.
How did I become bankrupt?
People can choose to apply for voluntary bankruptcy, but you can also be made involuntarily bankrupt if someone you owe money to (a creditor) applies to the court by presenting a creditor's petition.
To make you bankrupt, the creditor needs to prove you have committed an 'act of bankruptcy' within the 6 months prior to their application. Most often, this is done through serving you with a bankruptcy notice for the amount you owe.
If you don't pay the money owed or reach an agreement within the time given in the notice, you are committing an act of bankruptcy. The creditor can then ask the court to make you bankrupt.
The court will hear the creditor's petition proceeding and decide if you should be made bankrupt. If you are made bankrupt, the court issues a sequestration order and a trustee is appointed to manage your bankruptcy.
The Federal Court of Australia – Bankruptcy Guide provides more information about the court process.
How do I challenge the sequestration order made against me?
You can apply for a review of the sequestration order made by the court. You must make an application to the court within 21 days of the order. In some cases, the court can extend this time period.
Reasons for a review may include if you believe:
- you don't owe the money claimed by the creditor
- you didn't commit an act of bankruptcy (for example, you weren't served with a bankruptcy notice).
If your review is successful, the court will set aside the sequestration order and your assets will be returned to you.
To apply for a review of the sequestration order made by the court, use the forms on the Federal Circuit Court of Australia website.
For help with reviewing a sequestration order, you should seek legal advice.
If you apply for a review of the order, you must still lodge your Statement of Affairs and comply with your obligations as a bankrupt, until the court makes a final decision.