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If you are unable to pay your debts and cannot come to suitable repayment arrangements with your creditors, you may voluntarily lodge a petition to become a bankrupt (called a debtor's petition)

OR

a creditor may take action to have you declared bankrupt by order of the Court (called a sequestration order).

The consequences of bankruptcy are serious.

There will be a permanent record of your bankruptcy on the National Personal Insolvency Index (an electronic public register that can be accessed by anyone for a fee).

A trustee is appointed to administer the bankruptcy.  The duties of a trustee are specified in legislation and trustees have to adhere to certain standards while administering your estate. In order to pay creditors, your trustee will:

  • Sell your assets, including those you acquire or become entitled to during your bankruptcy (although you will be able to keep certain types of assets).
  • Recover any income you earn over a certain limit.
  • Investigate your financial affairs and may in certain circumstances recover property that you have transferred to someone else prior to your bankruptcy.

During and after your bankruptcy, you have certain obligations and face certain restrictions  You should read the information in FAQ section or contact us if anything is unclear.

Being made bankrupt by sequestration order

If you are unable to pay your debts, have been unable to enter into an arrangement with your creditors and you haven't voluntarily made yourself bankrupt, a creditor owed $5,000 or more may apply to the court to have you made bankrupt.

A creditor who claims they are owed money can ask the Federal Court or the Federal Circuit Court of Australia to declare the debtor bankrupt.  This application is called a creditor's petition.

If the court is satisfied with the creditor's evidence, it will issue an order (called a "sequestration order") making you bankrupt.

You will need to read all the information below and follow the process outlined if you have been made bankrupt by a sequestration order.

Lodging your own petition

If you are unable to pay your debts and cannot come to suitable repayment arrangements with your creditors, you may voluntarily lodge a petition to become bankrupt.

Your petition for bankruptcy may not be accepted if it appears from the information that is lodge with the petition that you are likely to be able to pay your debts, AND you are either avoiding payment of a particular debt/s, or have been previously bankrupt.

A debtor is ineligible to present a debtor's petition for bankruptcy if they are not in Australia or do not have an Australian connection (eg the debtor does not usually line in Australia nor does the debtor carry on business in Australia). You can choose to appoint a registered trustee by obtaining and providing their consent when you lodge your petition to be come bankrupt.  If you do not choose a trustee, AFSA may arrange for a registered trustee to be appointed. Otherwise, the Official Trustee is initially appointed to administer your estate.  Your creditors may choose to change the trustee at any time. The duties of a trustee are specified in legislation and trustees have to adhere to certain standards while administering your estate.