Bankruptcy with AFSA
Lodging a Bankruptcy can be done two ways, directly to the Australian Government (AFSA) or via a company that will assist with the process. Using a company will incur a fee however they will normally complete the documentation for you and answer any questions you may have. Lodging your forms directly with AFSA is a free service. The information on this page is to assist you in lodging your bankruptcy directly with AFSA.
How long does Bankruptcy last?
Bankruptcy normally lasts for 3 years and 1 day from the day you file your Bankruptcy Form.
This starts from the day the Australian Government (AFSA) accept your bankruptcy application. If a creditor makes you bankrupt, AFSA will calculate the bankruptcy period from the date you file your Bankruptcy Form. In some cases, your trustee can lodge an objection to extend the bankruptcy for up to eight years.
Bankruptcy may affect your income, employment and business
If you earn over a set amount, you may need to make compulsory payments to your trustee. There may also be some restrictions on your employment and running a business.
What are Contributions?
If your trustee determines you are earning over the income set amount, they’ll ask you to pay income contributions. Contributions is the word often used for compulsory payments from your income.
Your trustee can use these contributions to help repay your debts. Your trustee will notify you how and when you need to make payments. Compulsory income payments are:
- 50% of the amount you earn above the income threshold.
- Paid by you to your trustee, and may go towards your creditors.
- Calculated by your trustee to determine the amount you need to pay, if any.
If you earn over the set amount you may need to make compulsory payments towards your bankruptcy, (however, Child Support via the Child Support Agency and Family Tax benefits from Centrelink do not count towards this amount). There may also be some restrictions on your employment and running a business.
Income Threshold Amounts
|Number of Dependants *||Net (after tax) annual allowable income||Net (after tax) weekly allowable income|
|0||$ 59,031.70||$ 1,135.22|
|1||$ 69,657.41||$ 1,339.56|
|2||$ 74,970.26||$ 1,441.73|
|3||$ 77,921.84||$ 1,498.49|
|4||$ 79,102.48||$ 1,521.20|
|> 4||$ 80,283.11||$ 1,543.90|
If you have any enquiries about these payments, contact your trustee.
Can I keep my job if I’m bankrupt?
Bankruptcy doesn’t stop you from working and normally your trustee won’t tell your employer you are bankrupt. However employment contracts, industry associations or licensing authorities may impose certain restrictions or conditions should a member or licensee become bankrupt or enter into an arrangement under the Bankruptcy Act. Generally, state governments administer legislation that govern eligibility for particular trades (eg builders, plumbers, second-hand dealers, etc) while national or state-based professional associations and/or statutory boards set the eligibility requirements for particular professions (eg accountants, lawyers, barristers, tax agents, etc). It is best to seek clarification from your Human Resources department to ensure your employment won’t be affected.
Which debts does bankruptcy cover?
An unsecured debt is not tied to a specific property, like a house or a car.
Bankruptcy covers most unsecured debts, such as:
- credit and store cards
- unsecured personal loans and payday loans
- gas, electricity, phone and internet bills
- overdrawn bank accounts and unpaid rent
- medical, legal & accounting fees.
Bankruptcy releases most of these debts when it ends.
In some cases, you may need to confirm with the creditor to see if bankruptcy covers the following:
- Centrelink debts
- Australian Taxation Office debts
- victims of crime debts
- toll fines.
Bankruptcy doesn’t cover all debts, including:
- court-imposed penalties and fines
- child support & maintenance
- HECS & HELP debts (government student loans)
- debts you incur after your bankruptcy begins
- unliquidated debts (e.g. a debt where you and your creditor are yet to determine the amount).
Note: If you require assistance to liquidate a debt we suggest you seek financial or legal advice.
This means you are still liable for these debts. You need to contact your creditors directly to discuss payment options.
A secured debt is tied to a specific property, like a house. The creditor has the right to take possession of your property if you don’t make the repayments. If this occurs, you must assist with this recovery action.
Some examples are:
- mortgage (house is security)
- car loan (car is security)
- hire purchase or rent to buy (e.g. furniture or electronics as security).
You need to contact your secured creditors to discuss your intentions with the debt. If you’re unable to maintain the repayments, you may be able to surrender the goods. Sometimes the creditor may sell the goods, however, it still doesn’t cover what you owe if there is still an amount owing after the sale. This type of debt is called a shortfall. You can list the shortfall in your bankruptcy, then the creditor can no longer pursue you for this debt.
A joint debt is a debt you share with another person. Normally if one person enters bankruptcy, the other person that signed the initial contract becomes 100% liable for the debt. If both people are bankrupt, they should include the debt in both bankruptcies.
If you have a guarantor for a loan (e.g. your parent), the guarantor becomes 100% liable for the debt.
If you are a sole trader, you can list your debts in the bankruptcy. For company debt enquiries, contact the Australian Securities & Investments Commission.
However, if you are a personal guarantor for company debts, you can include these in your bankruptcy.
Debts you incur overseas are covered in your Australian bankruptcy. This means your creditors can’t pursue for that debt in Australia. However, your overseas creditors can pursue you for the debt if you travel back to that country.
This applies during and after your bankruptcy. You must include any overseas debts in your bankruptcy application.
It’s your responsibility to cancel any direct debits you have set up with your bank. It is best to speak to your bank directly if you want to stop a direct debit.
Can I save money?
Funds you have in your account on the date of bankruptcy can become the Trustee’s. Normally, you can save during bankruptcy if you keep your savings in an ordinary savings account.
If you place money in a term deposit account or purchase an asset, the cash has changed in nature. Therefore, your trustee can claim it to help repay your debts.
Can I still be the director of a company?
Not during bankruptcy. You are also unable to manage a company unless you have the permission of a court. For further company-related enquiries, contact the Australian Securities Investment Commission (ASIC) at asic.gov.au.
Can I run my own business?
Yes, however there may be restrictions. If you’re a sole trader, it’s your responsibility to make sure you fulfil your bankruptcy obligations.
Your business name should contain your full name. This allows people to search for your name on the National Personal Insolvency Index (NPII) if they choose.
If your business name doesn’t contain your full name, you must tell all people you do business with that you’re bankrupt.
It affects your ability to travel overseas
You must request permission from your trustee to travel overseas. It’s an offence to travel overseas without consent in writing. Your trustee may ask for further details to consider your request.
Your name will permanently appear on the National Personal Insolvency Index (NPII)
The National Personal Insolvency Index is a searchable public register listing insolvency proceedings in Australia.
Bankruptcy can affect your ability to obtain future credit
If you apply for credit over $5,882 you must inform the credit provider of your bankruptcy. Credit reporting agencies keep a record of your bankruptcy for:
- 5 years from the date you became bankrupt or
- 2 years from when your bankruptcy ends, whichever is later.
Your trustee may sell your assets
You are able to keep:
- ordinary household goods
- ordinary superannuation
- tools up to a $3800.
- A vehicle with a value up to $8,000
Your trustee can sell other assets including your house and property. You must not dispose of any property belonging to the trustee. You must declare any assets you have when you apply for bankruptcy and any you receive during bankruptcy.
You may lose the right to take or continue legal action
If you’re involved in any legal action, you need to inform your trustee. If you have a pending court case, you should contact the court to confirm whether you must still attend. Contact the Commonwealth Courts.
Apply for bankruptcy
Before you apply
The consequences of bankruptcy are serious and generally can’t be cancelled if you change your mind. Make sure you read and understand the full benefits and consequences before lodging your Bankruptcy Form.
How to apply
To apply for bankruptcy you need to complete and submit a Bankruptcy Form. You can submit your Bankruptcy Form using the Insolvency Services portal.
Once AFSA receive your application
If your bankruptcy application is accepted, AFSA will send you and your creditor’s confirmation in writing. This confirmation contains your administration number[?]. Your creditors may ask for this.
If AFSA don’t accept your application, AFSA will notify you in writing with the reason why.