Is your business experiencing financial difficulty?

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If you are experiencing financial difficulty – it’s important to face the situation as early as possible.

Start by getting a clear understanding of your finances. Speak with your accountant to confirm what debts and assets you have.

The relationship between your personal finances and your business finances can be confusing.  It’s important to understand your personal liability – this means the debts that you need to pay even if they are under your business name.

Stay in contact with the people and organisations you owe money to - i.e., your creditors. You may be able to come to an agreement with your creditors to set up a payment plan, pause interest or pay a lesser amount as a lump sum to settle the debt. If you don’t manage your debts, your creditors may take formal action to recover the money you owe them.  This could include using debt collectors, getting a court judgment or action to make you bankrupt.

You may find that your own invoices are not being paid by other businesses. If this is the case, consider how the Personal Property Securities Register (PPSR) may be of use to your business – including SMEs: making the most of the PPSR and Trying to get your invoices paid?

Get trustworthy advice. You can get advice from trusted sources such as accountants, business advisors as well as those who specialise in insolvency.

AFSA’s website contains contact details of registered personal insolvency practitioners:

Register of trustees | Australian Financial Security Authority (

Practicing registered debt agreement administrators | Australian Financial Security Authority (

It’s important to make sure the source is trustworthy. If you get advice that sounds too good to be true, you might be speaking with a dodgy advisor.

Dodgy (or untrustworthy) advisors may try to get you to pay to assist you with your situation by promising unrealistic outcomes. Not only could you end up paying a lot of money, if you go along with dodgy advice you could commit an offence, be prosecuted and end up with a criminal record Find out more about dodgy advisors.

Below are some of the free, independent, and confidential resources and services available to assist you if you are experiencing financial difficulty.



Small Business Debt Helpline

Free, independent and confidential advice from small business financial counsellors for those who are struggling with their business debts

Beyond Blue’s NewAccess for Small Business Owners

A mental health program which includes 6 one-one-one sessions with specialised coaches who are former small business owners

Australian Taxation Office

Tax support for businesses and not for profits

COVID-19 financial support for small business

Information about government support available to small business

National Debt Helpline

Free, independent and confidential professional financial counsellors helping people tackle their debt

Is personal insolvency right for you?

After assessing your situation, you may find that your business has unmanageable debt you can’t resolve. If this is the case, a personal insolvency may be the best option for you. The most well- known of these is bankruptcy, but there are other options listed below.

Debt Agreement (DA)

This is an agreement with your creditors to pay off your debts in instalments. Find out more

Personal Insolvency Agreement (PIA)

This is an agreement with your creditors but can be part payment by instalments or a lump sum. Find out more

Temporary Debt Protection (TPD)

This gives you a short period (21 days) to consider your options. In this time your unsecured creditors cannot take recovery action against you.  Find out more

These options are considered ‘an act of bankruptcy’ which means there will be a record on the National Personal Insolvency Index (NPII). Each has restrictions, requirements and consequences so it’s important to consider each option carefully. 

Is someone making you bankrupt?

If a creditor has started action against your business, don’t ignore the issue. You can still be made bankrupt as a person – even if the debt relates to your business.

Action to make a person bankrupt through the court will generally start with you receiving a Bankruptcy Notice.

The Bankruptcy Notice will tell you what you owe and that you have 21 days to resolve the debt with the creditor. If you do not pay the debt, then you may need to attend court. The court will decide if you will become bankrupt. If you do not attend court you can still be made bankrupt.

If you have received a Bankruptcy Notice, find out what you need to do.

If you are made bankrupt by the court, you should lodge your Bankruptcy Form as soon as possible. Although the bankruptcy will have started, the timeframe (3 years and 1 day) won’t start until your Bankruptcy Form is submitted. 

Are you going to enter bankruptcy?

If bankruptcy is your best option, you may be wondering what impact it will have your business.

You can operate a business even if you become bankrupt; this table explains the restrictions: 

Business name

Your business name will need to contain your full name. If it doesn’t then you will need to tell anyone that you do business with that you are bankrupt. For example:

‘David Smith Plumbing’ – doesn’t need to tell people about the bankruptcy.

‘Dave’s Speeding Plumbing- will need to tell people about the bankruptcy.


Your income will be assessed against a certain amount. Over that amount, half of any income goes towards repaying your creditors. If you are operating a business that will be considered in your assessment (e.g. business expenses).

Industry restrictions

Some professional or licensing bodies have restrictions in some trades or professions if bankrupt. Find out more

Obtaining credit

If you are borrowing money, obtaining goods and services, including through your business, you will need to disclose your bankruptcy if it is above a certain amount. This also applies if you take money above this amount for the provision of goods and services. 


If you operate your business as a partnership, then bankruptcy will impact your business partner. At the start of your bankruptcy the partnership will be ended and your business partner (if they are not also bankrupt) will need to speak with your trustee about what will happen with the business.

Business Assets

Assets owned by your business will become the property of your bankrupt estate. Your trustee (who manages your bankruptcy) will assess whether to sell the assets.

Tools of trade

You may keep tools that you use in operating your business up to a certain amount.

Business Debts

Any debts owed to your business (often called ‘book debts’) belong to your bankrupt estate and can be collected by your trustee.

What if my business is a company?

If you operate a company, the impacts of personal insolvency will be different than if you operate a business as sole trader or partnership.

You will need to confirm whether you are personally liable for the debts of your company. If you have signed a personal guarantee or a director’s guarantee, it is likely that you are personally liable. However, if you are not personally liable, those debts will not be covered if you go bankrupt.

If you become bankrupt, you can’t be a director of a company during the period of your bankruptcy (usually 3 years).  

Operating a small business under a company structure may mean you are eligible for options like a Small Business Restructure.

Visit ASIC’s website for more information about companies facing financial difficulty. Our ‘Personal Bankruptcy and Liquidation of a Company’ resource also provides some guidance about bankruptcy and insolvency for people in business and their advisors.

Authorised by the Australian Government, Canberra