When a person who owes you money becomes bankrupt, your rights to pursue them for payment may change.
The type of debt will determine whether you can pursue payment.
Some debts are covered in bankruptcy which means you’re unable to pursue payment. Other debts are not covered in bankruptcy, which means you may be able to pursue payment.
On this page:
- credit cards
- personal loans
- trade debts
- employee wages.
As a creditor, this means:
- You are not able to demand payment of the debt from the person.
- You may be eligible to receive payments from the trustee, if available.
- Most of these debts are released (or extinguished[?]) after the bankruptcy ends.
- You will need to contact the trustee of the bankruptcy for any updates or further information.
If you're listed as a creditor, the trustee will notify you. Ensure the trustee has your correct details so they can inform you of available payments.
- fines & penalties
- HECS & HELP debts
- debts incurred after the bankruptcy started.
As a creditor, this means:
- You may still be able to demand payment of the debt from the person.
- You are not eligible to receive payments from the trustee of the bankruptcy.
- The debt is not released (or extinguished[?]) after the bankruptcy ends.
For more information on unsecured debts and whether they are provable[?] and/or extinguished, please see: Creditor's quick guide - bankruptcy and unsecured debts
A secured debt is a debt tied to a particular asset, e.g. car or home loan.
Bankruptcy does not change your rights as a secured creditor.
- You are still able to pursue the person for payment of the debt.
- You may repossess and sell the secured goods if the person is unable to maintain repayments.
- If you sell the asset and it doesn’t cover the debt, the ‘shortfall’ becomes an unsecured debt covered in bankruptcy.
After a person enters into bankruptcy, we appoint a trustee to manage the bankrupt estate. The trustee will deal with any assets and make payments to creditors if funds become available.
Creditors can also make a person bankrupt by sequestration order[?]. If this happens, creditors may choose a trustee to manage the bankruptcy.
It's possible that you may receive a payment from the trustee. We call these payments dividends. This may be through the sale of assets or compulsory payments from the person who is bankrupt.
If you haven't received notification of the bankruptcy, the trustee may not be aware of your debt. You must contact the trustee to add or update your debt details.
If the trustee is not aware of your debt, you may miss out on a dividend payment.
Add your debt to a bankruptcy
To add your debt to an existing bankruptcy, you will need:
- AFSA administration number, and
- full name of bankrupt.
If you don't have these details, you may wish to complete a Bankruptcy Register Search.
If the trustee is the Official Trustee (AFSA) complete the online form to:
- add a debt
- update a debt
- tell us you've purchased a debt
If your employer is bankrupt and owes you wages, you may be able to get financial help from the Australian Government. For more information see https://www.jobs.gov.au/fair-entitlements-guarantee-feg
If money is being paid due to a sale of assets or compulsory payments from the person who is bankrupt, the trustee will let you know. Before paying you any money, the trustee will request that you lodge a proof of debt[?].
You can prove your debt by lodging a proof of debt form.
The trustee will ask you to complete this form, by a set date, if payments are available. If the trustee accepts the proof of debt, you may receive a dividend[?].
The trustee may ask you to verify your claim by way of a statutory declaration. If you fail to provide the statutory declaration, the trustee can dismiss your claim.
It’s your responsibility to prove to the trustee that the debt is genuine.
It’s important you:
- answer all questions
- check the debt amounts are correct
- calculate interest to the date of bankruptcy
- attach evidence of your claim, such as:
- personal guarantees given by the bankrupt individual
- submit the form by the nominated date - if you miss the deadline, contact the trustee.
There are different types of creditors[?].
Separate, joint, joint & several creditors
It is important you indicate which situation applies as the trustee will need this information to allocate your claim to the correct bankruptcy.
In some cases, there may be:
- Joint bankruptcies where two or more people go bankrupt together.
- Separate bankruptcies of individuals who jointly owed you money.
Depending on the terms of the credit agreement, you may have a claim against:
- only one of the individuals (separate)
- all of the individuals jointly only (joint) or
- the individuals jointly as well as all of them separately (joint & several).
The trustee may ask for further evidence of the security.
You are able to:
- prove all or part of your secured debt[?]
- surrender the security to the trustee, and claim for the whole debt
- sell the secured goods, and claim the shortfall (money still owing), or
- claim an estimated shortfall amount if the goods haven't yet been sold.
The trustee may ask for further evidence of a debt. If you have a judgment, you should include:
- details of the judgment and submit a copy with your proof of debt
- costs you were awarded in a judgment you obtained prior to the bankruptcy.
Provide your Australian Business Number (ABN) on the proof of debt. If you don't, the trustee may withhold tax on your dividend.
If there is goods and services tax (GST) included in your debt, you must specify that amount.
If a creditor is deceased, the executor of the estate may lodge a proof of debt.
A related creditor is a creditor who is a related entity[?].
- A related creditor can still lodge a proof of debt.
- If you think an individual failed to disclose a relationship with a creditor, contact the trustee.
From any available money, the trustee first pays fees and charges. You could be asked to approve the trustee's fees.
For more information see Approving a trustee's fees.
Creditors have the right to request to change the trustee. They do this by voting on a resolution[?] at a meeting of creditors. You may be asked to attend and vote at these meetings.
For more information see: About meetings of creditors
If you want to confirm someone is bankrupt, ask them for the trustee's details and AFSA administration number[?]. You can then contact their trustee for details of the bankruptcy.
If the trustee is the Official Trustee[?] (AFSA), contact us now.
If you are unable to obtain bankruptcy details, you may wish to complete a Bankruptcy Register Search.
Unclaimed money relates to funds from a bankruptcy or debt agreement where the trustee has been unable to locate the person/entity entitled to the funds.
For more information see: Claiming unclaimed money