What are 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.

You will have a trustee that will manage your bankruptcy

A trustee is the person or entity that manages your bankruptcy. They work with you, and your creditors[?], to achieve a fair and reasonable outcome for all. During bankruptcy, you have an obligation to provide information to your trustee, including changes to your circumstances. This may involve supplying books, bank statements and other documents that the trustee asks you to provide.

When you apply for voluntary bankruptcy, you are able to nominate a registered trustee of your choice. If you don’t nominate a trustee, we normally appoint the Official Trustee (AFSA). In some cases, the Official Trustee may transfer the administration of your estate to a registered trustee.

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: How does bankruptcy affect my income and employment?

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 when I’m bankrupt?

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 propertyYou 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: What can be taken or sold in bankruptcy?

You may lose the right to take or continue legal action

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. Contact the Commonwealth courts.

Bankruptcy normally lasts for 3 years and 1 day from the day you file your statement of affairs

This starts from the day we accept your bankruptcy application. If a creditor makes you bankrupt, we calculate the bankruptcy period from the date you file your statement of affairs[?]. In some cases, your trustee can lodge an objection[?] to extend the bankruptcy for up to eight years.

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