Bankruptcy

If you’re unable to pay your debts and cannot come to suitable payment arrangements with your creditors, you can apply to become bankrupt. Bankruptcy is a legal process that releases you from most debts, relieves you from the stress of dealing with debt collectors and lets you start over.

Bankruptcy can have serious long-term consequences and may make it harder to borrow money in the future. Before applying, it is important to get advice from a qualified financial counsellor or bankruptcy lawyer. They will look at whether you have any other options, and will explain what bankruptcy will mean for you. For more information on bankruptcy, visit the Australian Financial Security Authority (AFSA) or call 1300 364 785.

What happens if I become bankrupt?

Bankruptcy generally lasts for 3 years. When you become bankrupt, a trustee is appointed to control most of your financial affairs. The trustee tells creditors of your bankruptcy and your creditors will deal with your trustee instead of you to have their debts repaid.

To pay your creditors, the trustee will sell your assets (which may include your home); take some of your income once you are earning over a certain amount; and recover any property or money that you may have transferred to someone else for less than market value.

You will usually be able to keep essential household goods, your computer and clothing. You will also be able to keep your superannuation as long as it stays in your superannuation fund.