Act of bankruptcy An action or declaration which, if not carried through, can be used by a creditor to apply to the Court to make a person bankrupt.

Administrator An eligible person nominated by a debtor to handle a Debt Agreement on their behalf.

Antecedent Transaction A transaction that has taken place prior to a Personal Insolvency Agreement or bankruptcy. They include transactions where less than market price has been paid for an asset in consideration of a transfer in ownership or a transfer has been made to defeat the right of access by creditors or preferential payments are made to a specific creditor. A trustee has the ability to recover the asset or difference in purchase price paid.

Asset Anything a person owns before going bankrupt, or buys or receives during bankruptcy. Assets can be divided into two types - Divisible Assets and Exempt Assets.

Bankruptcy An insolvency procedure that applies to a natural person, not to a company. Where people, who cannot pay their debts become bankrupt to receive the protection of the Bankruptcy Act and their estate is administered by a trustee. It allows for the fair distribution of property among creditors and the prosecution of dishonest debtors.

Bankruptcy Notice A formal, final demand for payment of a debt by a creditor owed at least $5,000 on one or more final judgments or final orders. This notice is issued by ITSA through the Official Receiver. Failure to pay within 21 days is an act of bankruptcy.

Bankruptcy Offence An act by a person under the Bankruptcy Act that can lead to a person being prosecuted, fined, imprisoned, or made to make restitution.

Bankruptcy Act 1966 The Commonwealth legislation which covers bankruptcy, Part IX (Debt Agreements), and Part X arrangements. It deals with individuals not corporate entities which is covered by the Corporations Law administered by the Australian Securities and Investment Commission.

Benefit A bankrupt may derive a benefit from a number of sources. It could be a loan or a fringe benefit or monies paid to a third person as a result of exertion by a bankrupt. These types of benefits can be included as a part of a bankrupts contribution assessment to determine what contribution must be paid from a bankrupt's income.


Compromise Agree to accept a lesser sum in full payment of a debt.

Contribution A sum of money that a bankrupt person is required to regularly pay to their trustee from their income. It is normally called a compulsory contribution and is based on a statute based formula.

Controlling Trustee Is a person who is a private bankruptcy trustee, ITSA or an eligible solicitor who investigates a debtor's financial affairs and calls a meeting of the debtor's creditors under Part X of the Bankruptcy Act.


Creditor A person who is owed money.

Creditor's Petition Is a means by which a creditor makes an application to the Court to make a debtor bankrupt


Debt Agreement An arrangement between people who cannot pay their debts. It is a formal arrangement under Part IX of the Bankruptcy Act.

Debtor A person who owes a debt.

Debtor's Petition An application made to ITSA to become a bankrupt. The form to use is Form 6


Discharge The end of bankruptcy. The date of discharge is the day after bankruptcy ends. The statutory period of bankruptcy is three years and one day from when a person files their Statement of Affairs at ITSA through the Official Receiver.

Divisible Assets Assets/property which can legally be sold in bankruptcy by the trustee.


Examinable Affairs In relation to a person means the person's dealings, transactions, property and affairs and the financial affairs of an associated entity of the person in so far as they are or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs.

Exempt Assets Assets/property which cannot be sold in bankruptcy by the trustee. These are identified in s116 of the Bankruptcy Act.

Extension of Bankruptcy If a bankrupt fails to co-operate with their trustee, or fails to meet the requirements of the Bankruptcy Act, their bankruptcy can be extended to a 5 or 8 year period from the date they file their Statement of Affairs with ITSA through the Official Receiver. In certain circumstances, the period of bankruptcy does not commence until a bankrupt returns to Australia.


 
1.1 Do I need to become bankrupt?
How do I become bankrupt?
You can become bankrupt voluntarily or you can be made bankrupt on the actions of a creditor. If you have considered the alternatives available to you, and have decided that voluntary bankruptcy is your best option you will need to complete a Debtor's Petition and Statement of Affairs. You will need the name, address, and amount owed to each of your creditors. You must show all debts for which you are personally liable, whether business or personal. There are severe penalties including imprisonment for failure to disclose property or concealment or unlawful disposal of property or any item of value. You will need full details of your income, personal property which includes such things as house, car, bank accounts, shares, and any money owed to you. Following completion of the Statement of Affairs, Debtor's Petition and signing the acknowledgement that you have read and understood the Prescribed Information, you can post, hand deliver, fax or email your documents to ITSA. When the forms are accepted by the Official Receiver in Bankruptcy you become bankrupt. You will then be informed by your trustee of your bankruptcy and the number to use in future correspondence. This is a service that we can provide for you.

Is there a minimum amount I need to owe before I can go bankrupt?
No. You can become bankrupt voluntarily owing any amount; however the Official Receiver in Bankruptcy can reject your request to become bankrupt under certain circumstances. A creditor cannot make you bankrupt unless the debt is $5,000 or more.

Can a creditor make me bankrupt?
Yes, if you have a debt for $5,000 or more, a creditor can make you bankrupt. The creditor can apply to the Federal Court or Federal Magistrate's Court to have you declared bankrupt by sequestration order.

How do I obtain the relevant forms?
You can download the forms from the ITSA website or alternatively call ITSA on 1300 364 785 who will send the forms to you. If you use a professional service like us we will complete all of the forms for you. Please call us on 02 9623 7860 or 07 3613 9648 or 03 9993 0116.

What are the ITSA office hours?
ITSA offices are open Monday to Friday 8.30am - 5.00pm except for Public Holidays in your state. For more information please contact Information & Registry.

Can I make an appointment for assistance with completing my forms?
ITSA does not provide assistance with completing forms. Assistance with completing forms can be obtained from Financial Counsellors and Registered Trustees or relatives and friends or a professional serive like us.

How long will it take to process my forms?
Bankruptcy
Generally the Debtors Petition and Statement of Affairs forms are processed within a 24-48 hour period. When the forms are accepted by the Official Receiver in Bankruptcy you become bankrupt. You will receive a letter confirming your bankruptcy number and outlining your duties and obligations whilst bankrupt. Use your bankruptcy number in all correspondence with ITSA.

Debt Agreement Part IX
Once a Debt Agreement Proposal (DAP) is received the forms are processed within 24 hours. The voting proposal and report to creditors is sent within 5 days of the DAP being accepted. There is a 35 day voting period. The notification of the results of the creditor votes is within 5 days of the voting period ending. Whether the DAP is accepted or rejected, ITSA will advise you, your creditors and the debt agreement administrator of the outcome.

PIA Part X
Upon receipt of the Controlling Trustee Authority form, Statement of Affairs, the draft of the Personal Insolvency Agreement proposal, Proposal Checklist and payment, of the lodgement fee the forms are processed within a 24-48 hour period.

Have my forms been processed? What is my bankruptcy number?
You can contact 1300 364 785 to enquire on the progress of your bankruptcy application. Once your forms have been processed you will receive a letter advising you of your duties and obligations whilst bankrupt. The letter will also state you bankrupt estate number. You should use this number when corresponding with your trustee.

 Who would handle my bankruptcy?
If you are entering into bankruptcy voluntarily ITSA will be administering your estate unless you have chosen a registered trustee and have obtained their written consent. ITSA's fee's are set out in legislation. Registered trustees generally charge fees on hourly rates. If a creditor has taken action to bankrupt you, the creditor chooses the trustee. A creditor can request a change in trustee during the bankruptcy.

 How long would I be bankrupt?
The period of a bankruptcy is 3 years and one day from the date a statement of affairs is filed. This period may be extended by an objection entered by the trustee.

Objections will extend bankruptcy

To 5 years from the date of filing a statement of affairs if a bankrupt:
  • made a void transfer against the trustee because of Section 120/122 of the Bankruptcy Act 1966 (under valued transactions and preference payments)
  • continued to manage a corporation
  • engaged in misleading conduct and amount exceeds XXX (please see Current Amounts)
  • fails to disclose to the trustee, a liability that existed at the date of bankruptcy
  • fails to notify a change of address or daytime telephone number
  • fails to advise the trustee of any material change to the information disclosed on their statement of affairs
  • fails to attend a creditors' meeting without written approval from the trustee
  • fails to attend an interview or examination
  • fails to disclose any beneficial interest in any property

To 5 years from the date of returning to Australia:
  • leaves Australia without the written permission of the trustee and does not return

To 8 years from the date of filing a statement of affairs if a bankrupt:
  • made a void transfer against the trustee because of Sections 121;128B and 128C of the Bankruptcy Act 1966 (transfers to defeat creditors)
  • fails to provide details of property and income when requested
  • after the date of bankruptcy, the bankrupt deliberately provided false or misleading information to the trustee
  • fails to disclose detail of income or expected income
  • fails to pay contributions as assessed
  • fails to adequately explain how money was spent or assets were disposed of
  • fails to disclose to the trustee, a liability that existed at the date of bankruptcy
  • fails or refuses to sign a document when required
  • intentionally failing to disclose to the trustee, a beneficial interest in a property
    To 8 years from the date of returning to Australia
  • fails to return to Australia when requested to do so by the trustee


What is the process to bankrupt someone?
If you have a debtor who owes you $5,000 or more, and you have received a judgment or order in your favour you can commence bankruptcy proceedings. A Bankruptcy Notice (Form 1) is to be issued to the debtor. This gives the debtor 21 days to pay the debt. Non payment is an act of bankruptcy from which an application to the Federal Court or Federal Magistrate's Court can be made to have the debtor declared bankrupt by sequestration order.



 What debts are covered in bankruptcy?
You must disclose all your debts in your Statement of Affairs. Some debts are not provable in bankruptcy such as penalties or fines imposed by a court, HECS-HELP debts, debts you incur after the date of bankruptcy. When you are discharged from bankruptcy you will be released from your provable debts, however there are certain debts which you are not released from including maintenance, child support and debts incurred by fraud. Providers of essential services to your home (electricity, gas, water, telephone) may disconnect the service if you do not pay your current account and may ask for a security deposit or bond to continue the service.

Unsecured creditors: Generally do not have the right to repossess goods purchased. Any legal action being taken by an unsecured creditor (summons, garnishee, recovery action by a sheriff or bailiff) must stop. Once bankrupt you do not have to continue paying unsecured creditors (exceptions)

Secured creditors: A secured debt is where a creditor has a hold over an asset until the debt is paid for. Secured creditors include banks with a mortgage over a house, finance companies with a chattel mortgage, hire purchase, lease or bill of sale over a car or furniture. Bankruptcy does not affect the right of a secured creditor to repossess and sell the asset to reduce the debt in the event that you default on payments. Any shortfall from the sale of the asset is considered to be a provable debt.

Debts you still have to pay during bankruptcy: Creditors of certain types of debt can continue to pursue you even during bankruptcy such as penalties or fines imposed by a court, HECS-HELP debts, new debts you incur after the date of bankruptcy.

Debts you still have to pay when your bankruptcy ends: Creditors of certain debts can receive money from your bankrupt estate and also continue debt recovery action against you when you are discharged such as maintenance, child support and debts incurred by fraud.
What is the difference between a secured and unsecured debt?
An unsecured creditor is a creditor who does not have a hold over the chattels/assets/property purchased with the credit afforded to you. Such liabilities include credit card debts.
A secured creditor has a hold over the chattels/assets/property until the debt is paid in full. If a debtor defaults on a secured liability the creditor has the right to repossess and sell the chattels/assets/property to reduce the debt.

What happens if someone has guaranteed a debt?
Bankruptcy does not affect the rights of a creditor to claim under a guarantee. The creditor is entitled to recover payment from the guarantor. Once payment has been made, the guarantor steps in the shoes of the creditor and is able to lodge a claim in your bankruptcy for the debt paid.

Someone else also signed the loan agreement. Will they have to pay if I declare myself bankrupt?
Generally, yes. They will still have a liability for the total amount outstanding on all debts incurred in joint names.

 What about debts I incurred just before bankruptcy?
If you are already insolvent that is you cannot pay your debts as and when they fall due, it is advisable not to incur further credit because if you become bankrupt it may be an offence under the Bankruptcy Act, and you may be prosecuted.

Can I include my overseas debts in my bankruptcy?
Yes. If a person originally residing in another country, now residing in Australia files a petition in bankruptcy and they have a debt incurred in that foreign country, the debtor has an obligation to list the foreign debt and all Australian debts on the statement of affairs. Further, as a result of changes in Australian law, foreign creditors now have the same rights as Australian creditors. Hence, foreign creditors may seek to commence, and participate in, bankruptcy proceedings that have already commenced, as if they were Australian creditors.

However, where the foreign creditor does not choose to participate in the Australian bankruptcy and the bankrupt returns to the relevant country, there is nothing stopping the foreign creditor from commencing recovery proceedings or making the person bankrupt again based on the foreign country's insolvency laws.

 Am I liable to pay my HECS debt if I go bankrupt?
You must disclose all debts including any higher education loan debts. HECS-HELP, FEE-HELP or OS-HELP debts which arise after 1 January 2005 are not provable in bankruptcy. Consequential Act changes to existing accumulated HECS debts means they can be converted into new accumulated HELP debts. New accumulated HELP debts will not be provable from 1 June 2006. Debts which are not provable in bankruptcy are still to be paid.

 I have a judgement against me and have been convicted. Will this be covered if I declare myself bankrupt?
Fines or penalties imposed by a Court are not provable in bankruptcy. If a defendant is ordered to pay restitution, and becomes bankrupt, the restitution order is a provable debt in bankruptcy. There are some provable debts that a debtor is not released from at the discharge of their bankruptcy.

 Will the damages I have been ordered to pay be provable in bankruptcy?
If a defendant receives a pecuniary penalty order in the form of damages it is not provable in bankruptcy.

Who pays out all my debts?
Provable debts are debts for which a claim can be made in your bankruptcy. From the sale of your assets and income paid under the Bankruptcy Act, your trustee in bankruptcy will make a distribution to your creditors where sufficient funds are held otherwise your creditors are not paid. Such payment is made in accordance with the Bankruptcy Act.

What happens to a debt I forgot about at the time of becoming bankrupt?
If you forgot about a debt and remember it later, you should contact your trustee immediately with the name of the creditor, address, date the debt was incurred, amount of debt and any account or reference number/s supplied by the creditor. Your trustee will add the creditor to your bankruptcy and send a notification to the creditor. Failure to disclose debts could extend your bankruptcy to 5 years.
What about debts incurred after bankruptcy?
You are responsible for any debts incurred on or after the date of bankruptcy.

 I've had a car accident and the owner of the other car is pressing me for costs of repairs. Will the debt be covered in bankruptcy?
Debts which arise from being involved in a motor vehicle accident where you have not legally admitted liability are known as un-liquidated damages and are not provable in bankruptcy. The debt is covered by bankruptcy only if a court judgment has been obtained, or you have admitted responsibility for the debt in writing to the other party or its solicitor/insurer and have received documentary evidence that such admission has been received by the other party or its representatives, or started paying for repairs prior to bankruptcy.

 When are the creditors notified of my bankruptcy?
The creditors are notified in writing as soon as possible by the trustee and informed of the assets and liabilities disclosed by you on your statement of affairs.

A creditor has the right to on sell your debt to another agency. Creditors have a tendency to on sell debts in bulk and do not always inform the purchasing agency which debts are covered by an existing bankruptcy or other formal arrangement under the Bankruptcy Act, 1966. As a consequence, bankrupts, discharged bankrupts and/or debtors will receive a letter of demand or telephone call requiring payment from the purchasing agency. Should this occur, it is important that the purchasing agency is provided with your bankruptcy or formal arrangement details (ie Part X, Part IX) and/or have the purchasing agency contact the originating creditor to confirm the information.

 Can a creditor still contact me insisting on payment once I have become bankrupt?
No. The Bankruptcy Act prevents creditors from recovering money from you. An exception is a secured creditor with whom you have made arrangements to retain secured property as per FAQ 6. If other creditors attempt to recover money from you, you should advise them of your bankruptcy, and if they continue to insist you should notify your trustee. If physical harassment occurs, you should contact the police.

 Why are creditors still taking money from my bank account? I'm bankrupt.
You may have organised a direct debit from your account prior to bankruptcy to pay these creditors. You will need to cancel any direct debit authorities with your financial institution or bank. Arrangements with secured creditors need to be retained to avoid the creditor from seizing the asset.
 Will my bankruptcy affect my partner?
In some circumstances your partner will be affected. Where your partner is solvent (non bankrupt) and is jointly liable for the debts, the creditor will continue to pursue them for payment. Your partner will still be liable for the debt. If you & your partner have joint assets, your interest in the asset will vest with the trustee and will be sold.


 What assets can I keep?
Assets are anything of value you own when you become bankrupt plus anything you buy or receive before the end of your bankruptcy. Certain assets are protected by the Bankruptcy Act which means you may keep them. Generally your household items, furniture and personal effects, life insurance and superannuation policies are protected by the Bankruptcy Act. Tools used to earn an income, up to a set limit. Vehicles (cars or motorbikes), where the total value of the vehicles minus the sum owing under finance is less than a set limit. Some Assets are exempt.

 Will I lose my assets?
Once bankrupt you can no longer sell or deal with most of your assets or items of value, the exceptions being property protected under the Bankruptcy Act, as shown below. Only the trustee (ITSA or a registered trustee), or a secured creditor is able to do so. The trustee may dispose of your property for the benefit of creditors. See FAQ 6. Assets include anything of value belonging to you at the date of bankruptcy together with assets acquired by you before your discharge including lottery wins, prizes of value etc. Your interest in the family home, land, money in bank accounts, vehicles exceeding the prescribed amount in value, stocks and shares, antiques and other personal property of saleable value are all included. Any interest you have or acquire during bankruptcy as a beneficiary of a deceased estate belongs to the trustee.

Certain assets are protected by the Bankruptcy Act which means they cannot be sold by your trustee to pay creditors. The property protected by the Bankruptcy Act includes necessary household furniture, personal effects, limited tools of trade, life insurance and superannuation policies and the primary means of transport up to the prescribed amount in value (eg. car or motor bike).

 Will I lose my house?
Real property is an asset. A property or share of a property held by you will vest with the trustee at the date of bankruptcy. The trustee has to deal with any equity or interest you have in a property, for the benefit of your creditors. This may mean that the property has to be sold. If the property is jointly owned the trustee may consider selling its/his/her interest in your property to a non-bankrupt joint owner. A house property that is subject to a Defence Service Homes mortgage cannot be sold by the trustee without the approval of the Secretary of the Department of Veterans' Affairs. Defence Service Act 1918. A secured creditor could sell your property should you be unable to meet the mortgage repayments. Any shortfall will be a debt in your bankruptcy. If a surplus exists following sale, these monies will be paid to your trustee.

 How will the trustee deal with my house?
The trustee has to deal with any equity or interest you have in a property. This may mean that the property has to be sold. If the property is jointly owned the trustee may consider selling its/his/her interest in your property to a non-bankrupt joint owner. A secured creditor could sell your property should you be unable to meet the mortgage repayments. Any shortfall will be a debt in your bankruptcy. If a surplus exists following sale, these monies will be paid to your trustee.

 Will the trustee come out to my house?
Generally not, however if the trustee requires access to your home, you will normally receive notification prior to the visit. If you do not cooperate with the trustee, access can be obtained without notification by serving a notice on the occupier.

 What happens if I have transferred my house or another asset of value to my spouse prior to bankruptcy?
The trustee has the power to void transactions made within a period of 5 years prior to the bankruptcy. The trustee will investigate the transfer and may recover the asset if the transfer was consideration for the transfer was less than the market value.

If a transfer in a defined (generally 6 months) period prior to bankruptcy had the effect of giving a creditor a preference over other creditors, then that transfer will be void against the trustee.
Further, transfers of property, or a contribution to a superannuation fund, will be void against the trustee regardless of when the transfer was made prior to bankruptcy if that transfer or contribution was made to defeat the interests of creditors.

It is also important to note that disposing of property prior to bankruptcy with intent to defeat your creditors may constitute an offence under the Bankruptcy Act.

 Can I keep my car?
Once you become bankrupt, vehicles which are used mainly for transport (eg. car or motor bike), are protected and can be retained by you where your interest in the vehicle is less than the prescribed amount. Where the interest in the vehicles are valued at more than the prescribed amount, the trustee is required to sell, and give back to you the value of the prescribed amount and retain the balance for the benefit of your creditors. If the vehicles are jointly owned by two bankrupts the relevant value is double the prescribed amount. (see current amounts to determine the amount for a vehicle used for transportation under s116(2)(ca). This amount is adjusted in accordance with the Consumer Price Index).

 What happens to any assets that have not been sold by the trustee at the date of my discharge?
Your discharge from bankruptcy does not return those assets to you. The trustee may sell such assets after the date of your discharge. Only assets surplus to those required to pay 100 cents in the dollar plus interest on interest bearing debts are returned to you.


How does bankruptcy affect my employment?
Bankruptcy generally does not prevent you from working. However, if you are engaged in particular trades or professions there may be certain restrictions imposed by professional associations or licensing authorities. You should contact your professional association or licensing authority to confirm whether there is any effect on your membership or ability to practice a particular trade. A list of some trades/professions where restrictions may apply is available here. It is important to note that this is not a comprehensive listing and you are strongly encouraged to contact the relevant licensing authority or professional body to obtain further information.

 Will my employer be notified of my bankruptcy?
Generally not, however if your employer is a listed creditor in your bankruptcy, as a creditor they will receive confirmation of the bankruptcy. If you are required to pay compulsory contributions and you fail to do so, your employer may receive a notice requiring them to pay on your behalf.

 What if I leave my employment during bankruptcy?
Normally lump sum termination/redundancy payments are subject to taxation and accordingly, are treated as income by your trustee and added to any other income that you receive within the 12 month period in which you received the termination payment. (see FAQ Q42 above for details on payments you may be required to make to your trustee from your income).

 As I am bankrupt, how will my redundancy pay out be affected?
A redundancy pay out is classified as income under the Bankruptcy Act and will be added to your income earned in the contribution assessment period when received and be assessable for income contributions purposes.

 Do I have to make payments from my income to the trustee?
One effect of bankruptcy is to take the pressure off you to make payments to most of your creditors. If you earn an income you are obliged to make regular payments or "contributions" to the trustee for the benefit of creditors (see current amounts for current income threshold amounts). By law contributions are enforceable if your income is in excess of a statutory amount and may be directly deducted from your income if payments are not made. It is an offence for an employer to dismiss a bankrupt because the trustee has issued the employer with a notice to forward payment from the bankrupt's wages. In order to assess the contribution payable, a bankrupt's income is broadly defined to include money received from their employer and any other benefit, for example the private use of a motor vehicle or subsidised housing. Other factors are then considered and include the amount of income tax payable, maintenance payable, and the number of your dependants.


 When will I be discharged from my bankruptcy?
The bankruptcy period automatically ends three years and 1 day after the date on which a bankrupt files his or her statement of affairs without an objection to discharge being lodged. Your bankruptcy may be extended to five or eight years if your trustee lodges an objection to your discharge with ITSA.

 Can I be released from my bankruptcy earlier?
You can only be released early from your bankruptcy where you enter into a compromise with your creditors within bankruptcy, pay your debts in full to obtain an annulment or the Court makes a determination. You will be discharged automatically three years and one day from the date you filed your debtor's petition and the statement of affairs with ITSA. You cannot be discharged early from your bankruptcy.

 Can my bankruptcy be cancelled or annulled?
If you strive to pay your debts your bankruptcy may be annulled. Your trustee can issue a certificate of annulment when:-
  • all your debts and costs of administration of your bankruptcy have been paid in full, or
  • you make an offer of composition which is accepted by your creditors. A composition is an offer of a sum of money in full and final payment of your debts and it must be accepted by your creditors at a meeting and you must satisfy the terms of the offer; or
  • through your trustee you enter into an arrangement with your creditors where you offer to pay a sum of money over a period of time which is accepted in full and final settlement of your debts when payment is completed.
  • if you believe that you should never have been declared bankrupt, you can make an application to the Court (either Federal Court or the Federal Magistrates Court) to have your bankruptcy annulled under Section 153B. You will need to satisfy the Court that the bankruptcy should not have been made.

 My bankruptcy is discharged. What happens now?
The obligations and duties imposed on you whilst bankrupt no longer apply when you are discharged from bankruptcy. Your name appears on the public record (NPII) as a discharged bankrupt. Bankruptcy and other serious credit infringements are recorded for 7 years. Your name will be listed for 7 years from the commencement of your bankruptcy even if your bankruptcy has been discharged. If you have any of the following types of debts you may have to continue paying them such as penalties and fines imposed by a court, child support debts, maintenance debts, student HELP debts and student loans, (contact the Australian Taxation Office for information) debts incurred by fraud.

 My bankruptcy is discharged and I am unable to obtain a loan/credit
A consequence of bankruptcy is that lenders may limit your ability to borrow money or buy things on credit even after you have been discharged. If you have any queries regarding your credit rating you should contact Veda Advantage Ltd on 1300 762 207 or Dun and Bradstreet Pty Ltd on 13 23 33. There are other credit reporting agencies who maintain records of your bankruptcy.


 Can I continue to use my credit cards after bankruptcy?
It is a matter for the issuing bank or finance company as to whether they are prepared to continue to extend credit to you. All creditors at the date of bankruptcy should be listed on your Statement of Affairs and they will be notified of your bankruptcy. It is an offence for you to incur credit over a set limit* (see Current Amounts) without disclosing to the person you are dealing with that you are an undischarged bankrupt.

 Can I have a bank/cheque account?
In most cases, yes, with the agreement of the financial institution; however, any substantial funds accumulated in a bank or similar account may vest in the trustee as an after-acquired asset.

 How much money can I save during bankruptcy?
There is no set amount on the amount you can save during bankruptcy; however assets purchased with those funds will vest in the trustee. Any interest earned on accumulated savings will be classified as income.

 Why has my bank account been frozen?
A consequence of bankruptcy can be that your financial institution/bank may change or restrict how you can use your account. If your account has substantial funds, your financial institution/bank may have frozen your account as they have an obligation to advise the trustee. Financial institutions/banks are requested not to close, freeze or restrict access by bankrupts to accounts that receive government or superannuation benefits, or wages, for the purpose of meeting living expenses. Contact your financial institution for assistance in unfreezing your account.


 Can I keep running my business if I am bankrupt?
Under certain circumstances you can operate a business whilst bankrupt. It is suggested you trade under your own name to minimise the risk of committing an offence under the Bankruptcy Act. i.e. where you trade under an alternative name, you must inform everyone you deal with that you are an undischarged bankrupt.

If you are registered for GST and wish to continue in your trade or profession during your bankruptcy, you should advise the ATO so that your pre-bankruptcy GST liability (if any) can be separately identified

If you are a director of a company or involved in its management you will be disqualified and cease to be a director unless you have been given permission by the court. (Corporations Act 2001)

 What happens to my ABN or can I apply for an ABN now that I am bankrupt?
If you have an existing ABN when you become bankrupt, the trustee will advise the Deputy Commissioner of Taxation of your bankruptcy. The Tax Office will note the date of your bankruptcy against the ABN. If you wish to continue to use the ABN you will need to contact the Tax Office and arrange to have your ABN reactivated. Regardless of Bankruptcy you will still be responsible for lodging your BAS Statements. There is no restriction on applying for an ABN after becoming a bankrupt.


 What are my rights and responsibilities once bankrupt?
Your rights
You have the right to be treated justly and fairly by the trustee of your bankruptcy.

Your responsibilities
You have an obligation under the Bankruptcy Act to co-operate with your trustee and respond to all reasonable requests for information about your affairs made by the trustee. Whilst you are bankrupt you have an ongoing obligation to keep your trustee fully informed of any changes in your circumstances regarding such things as your current address, your employment/level of income, your marital status and dependents, receipt of lottery win or interest in a deceased estate.

Borrowing Money
Whilst there is no restriction on you incurring credit when you are bankrupt, you are obliged to disclose your bankruptcy status to the prospective credit provider if the amount involved exceeds the prescribed limit.(see Current Amounts ) Failure to do so is an offence under the Bankruptcy Act

Operating a Business
In certain circumstances you can operate a business during your bankruptcy. It is recommended that you trade under your own name because if you trade under a business name or an assumed name, you will be required to disclose your bankruptcy status to every person that you deal with. Failure to do so is an offence under the Bankruptcy Act. You cannot be a director of a company or be involved in its management without the permission of the Court, and to do so is an offence under the Corporations Act.

Overseas Travel
If you wish to travel overseas you must obtain the written permission of your trustee. It is an offence an under the Bankruptcy Act to leave Australia without the trustee's written permission. See FAQ 9.3 for further information.

I have changed my name. Do I need to notify my trustee?
You have an obligation to notify your trustee of any changes to your name, your income, address and telephone details.

 Can I travel overseas whilst bankrupt?
Any person who is an undischarged bankrupt must obtain written permission from their trustee to leave Australia. As soon as you become aware that you may need to leave Australia you should write to your trustee well in advance of the proposed departure with the following details:
  • reasons for departing Australia
  • dates of departure and return
  • details of the itinerary and any overseas contact details
  • particulars about who will fund travel costs
  • any documentary evidence supporting the request eg confirmation by an employer of the need to
  • travel, confirmation of payment of costs by a third party
It is an offence to leave Australia without the written permission of your trustee and your bankruptcy can be extended.

 Are there offences under bankruptcy?
Yes. The most important are listed below:-
  • disposing of property before bankruptcy with intent to defeat your creditors
  • failure to disclose assets
  • the deliberate obtaining of credit when you know you cannot pay
  • gambling and speculation which results in bankruptcy
  • incurring debts during bankruptcy for over a set limit* without disclosing that you are bankrupt (for limit see Current Amounts)
  • operating a business under an assumed name, without advising your bankruptcy
  • leaving Australia without the trustee's permission
  • failure to notify trustee of changes to name, address or contact telephone numbers.
    The penalties for these offences vary from 6 months to 3 years imprisonment upon conviction.


What happens at tax time and will I be able to keep my tax refund?
Tax refunds attributable to income earned by you prior to the date of your bankruptcy (irrespective of when it is received by you) is an asset that vests in your bankrupt estate and will be claimed by the trustee.

Tax refunds attributable to income earned during your bankruptcy will be treated as income for income assessment purposes. This means that if you fall into arrears in payment of your assessed income contributions, the trustee may use ITSA's garnishee powers to claim the tax refund up to the amount of the arrears.

Tax refunds after discharge may be retained by you. Regardless of bankruptcy you are still responsible for lodging your Income Tax Returns.

 Why has the Australian Tax Office retained my refund?
If the Australian Tax Office is a creditor of your bankruptcy, any refund you are entitled to during the period of bankruptcy may be retained by the ATO to offset any pre bankruptcy income debt and/or offset any Family Assistance, Child support debts incurred. After discharge, any debt still outstanding to the tax office which formed part of the bankruptcy cannot be recovered by the tax office. Tax refunds after discharge may be retained by you. Regardless of bankruptcy you are still responsible for lodging your Income Tax Returns.

 Who should I contact when the Australian Taxation Office (ATO) issues a statement of debt for pre-bankruptcy (provable) debts?
If during bankruptcy or if you have been discharged from bankruptcy and receive a statement of debt for pre-bankruptcy debts the ATO advises that you should contact their Insolvency Department on 1300 303 570 and select Option 1. They will up-date their records so that the statements cease.


 How can I confirm if someone is bankrupt?
The National Personal Insolvency Index (NPII) is a public and permanent register of personal insolvency proceeding in Australia. The NPII provides information regarding the insolvency status of individuals. Anyone can search for a name on the NPII for a fee. The search is conducted through authorised Index Search Agents.

 I have conducted a NPII search but do not understand the results.
If you are unsure of the information provided to you contact the authorised Index Search Agent that you obtained your search from.

 Can you tell me if XYZ company in bankrupt?
People become bankrupt, not corporate entities. Corporate entities are placed into Receivership, Voluntary Administration or Liquidation. Corporate matters are the responsibility of the Australian Securities and Investments Commission. ITSA is responsible for regulating and administering the personal insolvency system in Australia.


 What happens if I and/or my partner are involved in Family Court proceedings? Can the Family Law Courts deal with the bankruptcy?
The Family Court and Federal Magistrates Court can deal with the bankruptcy of a party to a marriage or de facto relationship involved in certain family law proceedings. The impact on parties is complex and legal advice should be obtained as the facts of each case are different. More information is available from the Fact Sheet: Family Law and Bankruptcy published by the Family Law Courts.

 I will be entitled to a compensation payout. How will this be affected?
There are different types/forms of compensation which need to be considered on their own merits. This is a complex area of law and will be determined on the individual set of circumstances. Compensation specifically relating to a personal injury or wrong done are generally exempt regardless of when received, together with the assets acquired from proceeds. Assets purchased with funds from exempt compensation together with other monies, the appreciated value on the non compensation monies is claimable by the trustee as an asset.

Can I access my superannuation if I am bankrupt?
Yes. Superannuation is a protected property under the Bankruptcy Act. Any superannuation funds accessed prior to bankruptcy are not protected.

What happens to my credit rating?
Defaults are listed for 5 years on a commercial credit reference record, however, bankruptcy and other serious credit infringements are recorded for 7 years. Your name will be listed for 7 years from the commencement of your bankruptcy even if your bankruptcy has been discharged. Lenders may limit your ability to borrow money or buy things on credit and you may find it hard to rent, or get electricity, water or the telephone connected, without paying a bond. If you have any queries regarding your credit rating after discharge you should contact Veda Advantage Ltd on 1300 762 207 or Dun and Bradstreet Pty Ltd on 13 23 33.

How do I get my name removed from the credit file?
The commercial credit file is maintain by Veda Advantage Ltd and Dun and Bradstreet Pty Ltd. Queries regarding your credit file contact Veda Advantage Ltd on 1300 762 207 or Dun and Bradstreet Pty Ltd on 13 23 33. Note: there are other credit reporting agencies.

Can a bankrupt be an executor of a Will?
There are no restrictions imposed by the Bankruptcy Act 1966 regarding a bankrupt being an executor of a Will.

Can a trustee of a family trust remain a trustee if they go bankrupt?
There are no consequences or obligations under the Bankruptcy Act 1966 that prevents a bankrupt from being a trustee of a family trust. However dependent upon the manner in which the family trust was set up, an appointor to the family trust may remove the Trustee and appoint a new one.

Is my bankruptcy advertised?
Generally no, however your trustee may choose to do so.

Will I have to appear in Court?
Your trustee will decide whether there are matters requiring examination before the Official Receiver or the Court. If, for example, investigations into your affairs are needed you may be required to attend an examination or an interview.

I have been served with a summons to attend court for an oral examination. Do I still have to attend now that I am bankrupt?
Yes. It is recommended that you still attend the court on the day and advise them of you bankruptcy. You may be required to produce a copy of the trustee's letter confirming your bankruptcy.

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