Bankruptcy is available to people who can’t pay their debts, or who are suffering financial hardship.

How Does a Person Go Bankrupt

A person who can’t pay their debts may voluntarily file for bankruptcy by filing a Debtor’s Petition with the Official Receiver from the Australian Financial Security Authority (“AFSA“).  AFSA is a Commonwealth Government agency. A person filing for bankruptcy may appoint the Official Trustee from AFSA to act as their trustee, or they may appoint a private trustee, such as those at Pearce & Heers.

Creditors can also apply to Court to make a person who is unable to pay their debts bankrupt. To do this a creditor must generally have a judgment against the person for over $5,000 and have issued a Bankruptcy Notice. A creditor who applies to Court in order to bankrupt someone may elect to have the Court appoint a private trustee or they can arrange for the Court to appoint the Official Trustee.

What are the Consequences of Bankruptcy

If a person becomes bankrupt:

  • The person is released from their provable debts;
  • An independent party (the bankruptcy trustee) is appointed to arrange for the sale of the person’s divisible property;
  • The funds realised by the bankruptcy trustee are distributed towards payment of costs and then to the bankrupt’s creditors.

The divisible property which will be sold or realised in bankruptcy may include a person’s interest in any real property, shares, cash at bank or motor vehicles or tools of trade over a certain value. However, it does not include (subject to certain exceptions), superannuation, household furniture and belongings and other excluded assets including tools of trade and motor vehicles valued at less than the statutory limit.

Some of the other common consequences of bankruptcy are:-

  • There will be a permanent record of a person’s bankruptcy on the National Personal Insolvency Index, which is a register maintained by AFSA of people who have become bankrupt or been a party to other types of insolvency proceedings;
  • A person must prepare and lodge a Statement of Affairs with AFSA at the time of filing a Debtor’s Petition for bankruptcy or a person made bankrupt by the Court must provide their trustee with a Statement of Affairs within 14 days of being notified of their bankruptcy;

A person who is bankrupt cannot act as a company director, or trade a business other than under their own name;

Undischarged bankrupts are not entitled to incur credit over a certain statutory limit without advising the person that they are dealing with that they are bankrupt;

  • A person who is bankrupt is required to pay income contributions to their trustee if their net after tax income exceeds a certain statutory limit; and
  • A person who is bankrupt must deliver their passport to their trustee and must not travel overseas without their trustee’s written consent.

Information and Advice Regarding Bankruptcy

If you would like to obtain further general information regarding bankruptcy you may wish to view our Bankruptcy FAQs Page. You may use our Income Contribution Calculator to estimate the income contributions you are liable for.

If you are seeking advice regarding bankruptcy please contact our Brisbane or Gold Coast office and our experienced staff will be able to assist you.


We’re happy to answer any questions you may have, so please don’t hesitate to call us and schedule a consultation.



Level 12
127 Creek Street
Brisbane Qld 4000


Phone: 07 3221 0055
Fax: 07 3221 8885

Postal Address

GPO Box 691
Brisbane Qld 4001



Level 15, Corporate Centre One
2 Corporate Court
Bundall Qld 4217


Phone: 07 5630 1179
Fax: 07 3221 8885