| Common term | Definition |
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Bankruptcy
| A legal process where people who cannot pay their debts give up their assets and control of their finances, either by agreement or a court order, in exchange for protection from legal action by creditors. |
Bankruptcy notice
| A written formal demand from a creditor to a debtor when the creditor wants to apply for the debtor to be bankrupt. The demand is endorsed by the Australian Financial Security Authority. |
Creditor's petition
| An application from a creditor to the Federal Circuit and Family Court of Australia or the Federal Court of Australia asking for a debtor to be made bankrupt. If the application is approved, the Court will make a sequestration order. |
Debt agreement
| A formal arrangement between a person who cannot pay their debts and their creditors, under Part IX of the Bankruptcy Act 1966 (Cth).
To be eligible for a debt agreement, a debtor must be insolvent and meet threshold levels relating to unsecured debts and assets and after-tax income.
For more information, see Am I eligible for a debt agreement? on the Australian Financial Security Authority website.
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| Debtor's petition | An application made to the Australian Financial Security Authority to become a bankrupt. |
| Insolvent | When a person is unable to pay their debts. |
| National Personal Insolvency Index (NPII) | An electronic register of information about all Australian bankruptcies, debt agreements, personal insolvency agreements, and any other proceedings under the Bankruptcy Act 1966 (Cth). The information is public and can be accessed for a fee. |
| Non-provable debt | A debt that is not included in a bankruptcy, that a debtor still has a legal obligation to pay. Examples of non-provable debts include:
- court imposed fines and bail bonds
- child support debts
- some Centrelink debts, for example, a debt caused by fraud
- HECS and HELP debts
- any debts incurred after the date of bankruptcy.
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| Personal insolvency agreement | A formal agreement between a person who cannot pay their debts and their creditors, under Part X of the Bankruptcy Act 1966 (Cth).
Unlike debt agreements, personal insolvency agreements are not subject to income, asset or debt thresholds.
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Provable debt
| A debt that is included in a bankruptcy. When the bankruptcy period ends, the debtor does not have a legal obligation to pay it.
During the bankruptcy period, if any assets are sold, money from the sale may be paid towards creditors that are owed provable debts.
Examples of provable debts (if they are included at the time of going bankrupt) are:
- final orders for restitution
- mortgages
- electricity, gas, telephone and water service debts.
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Sequestration order
| An order made by a Registrar or Judge of the Federal Court of Australia, or a Judge from the Federal Circuit and Family Court of Australia, making a person bankrupt based on a creditor's petition or other application under the Bankruptcy Act 1966 (Cth). |
Temporary debt protection
| An application to AFSA for temporary debt protection can provide 21 days of relief against enforcement action such as garnishee orders or recovery of goods. This provides additional time to negotiate with creditors and seek further advice from financial counsellors. |
| Trustee | A person who has control of and administers bankruptcies or certain debt agreements. They are registered with the Australian Financial Security Authority.
Often a private trustee or administrator is appointed, but if they are not, the Official Trustee in Bankruptcy is appointed, which is usually a body corporate.
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