Make someone bankrupt

If you are owed money, there are formal ways to demand payment. Before taking formal action, we strongly suggest that you first try to negotiate an informal payment agreement.

If a person (or debtor) owes you or your business more than $5,000 you may be able to apply to make them bankrupt.

Before making someone bankrupt

If a person is having trouble paying their debts, they may approach you as a creditor for assistance. Creditors are encouraged by consumer protection laws to take a flexible approach to payment arrangements.

Consumer protection laws are enforced by the Australian Competition & Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC). Together they have published a guide you may find useful.
For more information see: Debt collection guideline for collectors & creditors.

If it isn't possible to come to an arrangement directly with a debtor, debt collection agencies may help you recover the debt. Seek legal assistance for advice on your rights and options available to you.

Steps to make someone bankrupt

  1. Get a court judgment or order

  2. Apply for a bankruptcy notice
    See: How do I apply for a bankruptcy notice

  3. Serve the bankruptcy notice
    See: Serve, amend or extend a bankruptcy notice

  4. File a creditor’s petition with the courts
    See: File a creditor's petition.

  5. The Sequestration order
    If a court accepts your creditor's petition[?], they may grant a Sequestration order[?]. This makes the person bankrupt.
    For more information see: Official Receiver Practice Statement 3 - Bankruptcy by sequestration order.

Judgments & orders

To apply for a bankruptcy notice you must provide a final judgment[?] or order from a court that proves someone owes you a debt.

We encourage you to Seek legal assistance or contact your local court for more information on this process. We are unable to provide legal advice about how to obtain a judgment.

The judgment or order must:

  • show that the person (or debtor) owes you $5000 or more and
  • be less than 6 years old.

Include one of the following in your bankruptcy notice application:

  • Copy of the sealed or certified judgment/order.
  • Certificate of the judgment/order sealed by the court or signed by an officer of the court.
  • Certified copy of the court entry of the judgment/order. Certified means an officer of the court has sealed or signed it.

Can I lodge more than one judgment?

Yes. You can include more than one judgment or order to show a combined debt of $5000 or more.

Can I base a bankruptcy notice on 2 judgments from different creditors?

No. However, you can use 2 or more judgments for the same creditor to apply for a bankruptcy notice.

Filing documents

Throughout the process of making someone bankrupt you must lodge certain documents, commonly:

  • Bankruptcy notice application[?] - using our online services
  • Creditor’s petition[?]-  endorsed by the court
  • Trustee consent to act declaration[?] - using the form here
  • Sequestration order[?] - made by the court

Bankruptcy documents

If you have initiated the following procedures in court, you must lodge certain documents with us within a set timeframe. If you don't, you could face penalties, including an infringement notice.

  • Creditor's petitions and related orders (including stay, extension, dismissal or adjournment). You must file this with us within 2 working days of the court endorsing the petition / order.
  • Interim control orders - within 7 working days of the order being made (this includes orders, applications, affidavits)
  • Sequestration orders and related orders - within 2 working days of the court making the order.
  • Trustee consent to act declaration (only if you choose to nominate a trustee)- within 2 working days of the court issuing the sequestration order.
  • Part XI deceased estate administration orders - within 2 working days of the court making the order.
    For more information see Making a deceased estate bankrupt.

For more information see Filing requirements.

How to appoint a trustee

You can choose to appoint a particular trustee to manage the bankruptcy. A full list of all trustees can be found at Registered trustees contact list.

To appoint a trustee, the trustee must complete a Consent to act as trustee form.

It’s not mandatory to appoint a trustee.  If you don’t, we'll appoint one on your behalf. This could be either a:

  • registered trustee[?] or
  • the Official Trustee in bankruptcy[?] (AFSA).

What happens once I make the person bankrupt?

  • We notify the person of their bankruptcy.
  • We send the person a statement of affairs[?], which they will need to complete and return within 14 days.
  • The 3 year and 1 day bankruptcy period will not begin until we accept the statement of affairs.

Once I register the bankruptcy

  • The trustee will manage the bankruptcy and investigate if they can claim assets to pay creditors.
  • The individual may need to make compulsory payments[?] if they earn over a set amount.
  • If payments are available to creditors, the trustee will contact you with further instructions.
    For more information see: The person is bankrupt - what happens now?

Deceased estates

If someone passes away in debt, it may be possible to make their deceased estate bankrupt. This is in accordance with Part XI of the Bankruptcy Act 1966.

To do this, you must apply to the Federal Court or Federal Circuit Court. For more information about the court process, forms and fees, contact them.

It is possible that state and territory probate laws deal with insolvent deceased estates.  You should seek legal assistance regarding this process.

People who can bankrupt a deceased individual are:

  • a creditor[?] of the deceased estate or
  • the administrator, executor or legal personal representative of the deceased estate.

For more information see Official Receiver Practice Statement 5 - Insolvent Deceased Estates.

If you are a creditor of a deceased estate

If you are a creditor[?] wanting to bankrupt a deceased estate, it is a similar process to a creditor's petition[?]. You must:

  • Present a petition to the Federal or Federal Circuit Court by filing with them:
    • Form 14 - Creditor's petition for administration of deceased person's estate - available from the court at fedcourt.gov.au
    • The court may also require you to provide affidavits in support of your application.
  • Prove that the deceased met the Australian connection requirements.
  • Prove that the deceased owed you and/or other creditors at least $5000. (There is no need to prove an 'act of bankruptcy'[?]).
  • You can choose to appoint a trustee[?] (this is not mandatory).
  • Serve a sealed copy of the petition on the deceased's legal personal representative, if they have one.
  • File a copy of the court application (with Form 14) with us within 2 working days of the court endorsing the petition.

If the court grants the creditor's petition administration order, this makes the estate bankrupt:

  • You must file a copy with us within 2 working days of the court endorsing the order.
  • We register the bankruptcy on the National Personal Insolvency Index (NPII).[?]
  • A trustee is appointed to manage the bankruptcy. If you don't nominate a trustee, we choose one for you.
  • We send a statement of affairs[?] to the deceased's legal personal representative to complete. They should file this with us within 28 days of them receiving notification.

If you are the administrator of a deceased estate

If you are the administrator (or executor or legal personal representative) of the deceased individual's estate, to bankrupt them you must:

  • Present a petition to the Federal or Federal Circuit Court. You need to include 2 forms with your petition:
    • Form 15 - Administrator's petition - available from the court here and
    • Form 4 - Statement of affairs under Part XI - available from us here
  • The court may require you to provide affidavits to verify your capacity to act on behalf of the deceased estate.
  • Prove that the deceased met the Australian connection requirements.
  • You can choose to appoint a trustee (this is not mandatory).
  • File with us a copy of the court application (with Form 15 & Form 4). You must do this within 2 working days of the court endorsing the petition.

If the court grants an administration order, this makes the estate bankrupt;

  • You must file a copy with us within 2 working days of the court endorsing the order.
  • We register the bankruptcy on the NPII.
  • We appoint a trustee to manage the bankruptcy. If you don't nominate a trustee, we choose one for you.