Bankruptcy refers to the situation where an individual is unable to meet their financial obligations and repay accrued debt. It occurs when an individual does not have enough money/assets to pay creditors or a debt that is owed. However, it is not to be confused with the American term in which ‘bankruptcy’ is used for companies and not individuals.

How can I become bankrupt?

You can become bankrupt voluntarily owing any amount or you can be made bankrupt on the actions of a creditor if the debt is $5,000 or more.

If you find that you are unable to repay your debts, you cannot just declare that you are bankrupt. You must go through a formal process and be deemed eligible, and hence legally declare it; that is if the bankruptcy is voluntary.

Will bankruptcy affect my partner?

In some circumstances your partner will be affected. Where your partner is solvent (non bankrupt) and is jointly liable for the debts, the creditor will continue to pursue them for payment. If you & your partner have joint assets, your interest in the asset will vest with the trustee and may be sold.

Who administers a bankruptcy?

•  Insolvency and Trustee Service Australia (ITSA)
•  A registered trustee who agrees to administer your estate

How long does bankruptcy last?

Generally, bankruptcy lasts for a period of three years and one day from the date a statement of affairs is filed or from the date of bankruptcy as determined by the Court. However it can also be extended to five or eight years if any conditions of bankruptcy were breached or your trustee objects to your discharge as a result.

What may cause an extension of the bankruptcy period?

The period may extend to 5 years if a bankrupt:

•  makes a void transfer against the trustee – any under-valued transactions and preference payments
•  continues to manage a corporation
•  engages in misleading conduct
•  fails to disclose to the trustee a liability that existed at the date of bankruptcy
•  fails to notify a change of address or daytime telephone number
•  fails to advise the trustee of any material change to the information disclosed on their statement of affairs
•  fails to attend a creditors’ meeting without written approval from the trustee
•  fails to attend an interview or examination
•  fails to disclose any beneficial interest in any property
•  leaves Australia without the written permission of the trustee and does not return (five years additional once they return to Australia)

It may extend to 8 years from the date of filing a statement of affairs if a bankrupt:

•  makes a void transfer against the trustee, which includes transfers to defeat creditors
•  fails to provide details of property and income when requested
•  deliberately provided false or misleading information to the trustee after the date of bankruptcy
•  fails to disclose details of income or expected income
•  fails to pay contributions as assessed
•  fails to adequately explain how money was spent or assets were disposed of
•  fails to disclose a liability that existed at the date of bankruptcy
•  fails or refuses to sign a document when required
•  intentionally fails to disclose to the trustee a beneficial interest in a property

How long will the record last?

There is a permanent record of your bankruptcy on the National Personal Insolvency Index (an electronic public register which can be accessed by anyone for a fee).

Bankruptcy and other serious credit infringements are recorded for 7 years. Your name will be listed for 7 years from the commencement of your bankruptcy even if your bankruptcy has been discharged. Lenders may limit your ability to borrow money or buy things on credit for an amount exceeding $4,1700, it is an offence if you do not inform the person that you are an undischarged bankrupt; also you may find it hard to rent, or get electricity, water or the telephone connected, without paying a bond.

What will change while I am bankrupt?


Bankruptcy generally does not prevent you from working. Your employer is not normally notified of your bankruptcy, unless you owe him or her money. If you are engaged in particular trades or professions there may be certain restrictions imposed by professional associations or licensing authorities. You should contact your professional association or licensing authority to confirm whether there is any effect on your membership or ability to practice a particular trade.

Change of details

You are required to inform your trustee of any changes to your name or address.


Any person who is an undischarged bankrupt must obtain written permission from their trustee to leave Australia. As soon as you become aware that you may need to leave Australia you should write to your trustee well in advance of the proposed departure with the following details:

•  reasons for departing Australia
•  dates of departure and return
•  details of the itinerary and any overseas contact details
•  particulars about who will fund travel costs
•  any documentary evidence supporting the request eg confirmation by an employer of the need to
•  travel, confirmation of payment of costs by a third party

It is an offence to leave Australia without the written permission of your trustee and your bankruptcy can be extended.

Here at The Quinn Group, the dedicated team of lawyers and accountants at can assist you with advice and assistance for your bankruptcy needs. Contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.