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Bankruptcy

Information about bankruptcy for debtors (person who owes the debt).

This topic covers

  • Financial counselling and alternatives to bankruptcy
  • Debtor's petitions, and voluntarily going bankrupt
  • Applying for and responding to a bankruptcy notice
  • Creditor's petitions and sequestration orders
  • The effects of bankruptcy, including how it affects income, assets and credit reporting
  • The end of bankruptcy

This topic has information for individuals, not businesses or companies.​

Time limitAction
Six yearsFor a creditor to apply to make you bankrupt from the time of the judgment debt, if the debt is at least $10,000.
21 days or the time specified in the bankruptcy noticeTo pay the debt to the creditor, if you have received a bankruptcy notice. If you don't pay within this timeframe, the creditor can apply to the Federal Circuit and Family Court of Australia or the Federal Court of Australia for a sequestration order, an order to make you bankrupt.
14 daysTo file a bankruptcy form (Statement of Affairs) from when you were notified of your bankruptcy.

Organisations

OrganisationResponsibilities

Federal Circuit and Family Court of Australia

Federal Court of Australia

Where bankruptcy cases are heard. The rules, forms and process are the same in each court, although most cases are generally heard in the Federal Circuit and Family Court of Australia.
Australian Financial Security Authority (AFSA)The Commonwealth agency responsible for the administration and regulation of bankruptcies.

Legislation

AuthorityCovers
Bankruptcy Act 1966 (Cth)Legislation covering bankruptcy for individuals
Bankruptcy Regulations 1996 (Cth)
Federal Court (Bankruptcy) Rules 2005 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) 
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) 

Common termDefinition

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. 

Debtor's petitionAn application made to the Australian Financial Security Authority to become a bankrupt.
InsolventWhen 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.
​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.

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 inclu​​ded at the time of going bankrupt) are:

  • final orders for restitution
  • mortgages
  • electricity, gas, telephone and water service debts.

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.

OrganisationFee
 Australian Financial Security Authority (AFSA)There is no fee to lodge a debtor's petition when you want to make yourself bankrupt
Federal Circuit and Family Court of AustraliaThere is a filing fee for a creditor's petition. See General federal law fees on the Federal Circuit and Family Court of Australia website.

In some cases, such as if you hold certain government concession cards or you can demonstrate financial hardship, you may be exempt from paying court fees. See Application for exemption from paying Court fees - general (general federal law) and Application for exemption from paying Court fees or reduction - financial hardship (general federal law) on the Federal Circuit and Family Court of Australia website and Exemption from Paying Court Fees on the Federal Court of Australia website.

OrganisationForms
Australian Financial Security Authority Bankruptcy Forms
Federal Circuit and Family Court of AustraliaGeneral federal law forms
Federal Court of AustraliaForms under the Federal Court (Bankruptcy) Rules 2016

TypeCosts
Federal Circuit and Family Court of Australia and the Federal Court of AustraliaCan make costs orders as they see fit.

Frequently Asked Questions

Bankruptcy FAQs

Frequently Asked Questions about bankruptcy for debtors (person who owes the debt).

Contact us

If you have a legal problem in NSW, Legal Aid NSW is here to help you.

Bankruptcy

This page has information about bankruptcy, what happens if you are made bankrupt and how to get help if you can't pay your debts.

Last updated: June 2025