If a person (the "debtor") is unable to pay their debts and cannot come to suitable repayment arrangements with their creditors, they may voluntarily petition to become bankrupt.

Creditors can also apply to the court to make the debtor bankrupt if they can satisfy the court that they owe them money above a minimum amount. Creditors must have already served a Bankruptcy Notice on the debtor to apply to the court to make such an order.

Bankruptcy generally lasts for a period of three years but can be extended in certain circumstances. There is a permanent record of a debtor's bankruptcy on the National Personal Insolvency Index (an electronic public register which can be accessed by anyone for a fee).

Creditors are notified of a debtor's bankruptcy and unsecured creditors should stop pursuing the debtor for payment of their debts.

A trustee will be appointed to the debtor's case. In order to pay creditors, this trustee will:


  • sell the debtor's assets (although they will be able to keep certain types of assets)
  • mandate contributions from the debtor's income once they earn over a certain amount
  • investigate the debtor's financial affairs and may recover property or money that the debtor has transferred to someone else for inadequate consideration

The debtor may choose to appoint a registered trustee by obtaining and providing their consent when they lodge a petition to become bankrupt. If they do not choose a trustee, the Official Trustee (ITSA) is initially appointed to administer the estate. For more information please contact this office or visit the Insolvency Trustee Service of Australia's website.

For more information about bankruptcy please contact Adam Shepard of this office.