Personal bankruptcy declaration or debt agreement
Individuals with unmanageable personal debt can voluntarily petition for bankruptcy via AFSA.
Who must comply
Individuals (including joint and partnership applicants) who apply for or are made bankrupt, and creditors using the bankruptcy notice and creditor's petition process. AFSA does not handle corporate insolvency.
What triggers it
An individual being unable to pay their debts and applying for bankruptcy, or failing to comply within 21 days with a bankruptcy notice based on a final judgment of $10,000 or more (an act of bankruptcy that supports a creditor's petition).
When due
Debtor's Petition and Statement of Affairs submitted together (joint applicants on the same day); where a creditor made the person bankrupt, the Statement of Affairs within 14 days of notification; changes of name, address, income or employment reported to the trustee during the bankruptcy; a bankruptcy notice must be served within 6 months of issue and complied with within 21 days of service.
Evidence required
Debtor's Petition and Statement of Affairs listing all debts, assets and income; any Trustee Consent to Act Declaration; income and mortgage statements and other financial information requested by the trustee; records of income contributions paid; notices of changed circumstances.
Max penalty
AFSA notes there may be penalties for not complying with a bankrupt's obligations and restrictions, and the trustee may extend the bankruptcy. Bankruptcy offence penalty amounts were not verified for this entry; check the Bankruptcy Act 1966 on legislation.gov.au
Who must comply with this? The applicability test by industry, business structure and size.
Summary
The Bankruptcy Act 1966 is administered for individuals by the Australian Financial Security Authority (AFSA); corporate insolvency sits with ASIC. A person can apply for voluntary bankruptcy by lodging a Debtor's Petition and a Statement of Affairs together, or a creditor owed $10,000 or more can apply to the court for a sequestration order. Bankruptcy lasts at least 3 years and 1 day and releases the bankrupt from most debts. A trustee (a registered trustee, or the Official Trustee at AFSA) is appointed, notifies creditors, can sell certain assets and can require income contributions above a set threshold. The bankrupt must disclose debts, income and assets, report changes, and disclose the bankruptcy when seeking credit above a set amount or trading under another business name. Other formal options are temporary debt protection (21 days), a debt agreement and a personal insolvency agreement.
Enforced by
Source legislation
Topics
Related
- CWLTHRegister security interests on the PPSRSecured creditors must register on the Personal Property Securities Register to preserve priority.
- CWLTHPrevent insolvent trading (s 588G)Directors must prevent the company incurring debts while insolvent — or face personal liability.
- CWLTHAppoint voluntary administrator under Part 5.3A Corporations ActDirectors can place company in voluntary administration when insolvent — pause creditor claims for restructuring window.
- CWLTHSimplified Debt Restructuring (small business)Small companies (<$1M liabilities) can use SDR to restructure without full external admin.
Frequently asked questions
- Who must comply with Personal bankruptcy declaration or debt agreement?
- Individuals (including joint and partnership applicants) who apply for or are made bankrupt, and creditors using the bankruptcy notice and creditor's petition process. AFSA does not handle corporate insolvency.
- What triggers Personal bankruptcy declaration or debt agreement?
- An individual being unable to pay their debts and applying for bankruptcy, or failing to comply within 21 days with a bankruptcy notice based on a final judgment of $10,000 or more (an act of bankruptcy that supports a creditor's petition).
- When is Personal bankruptcy declaration or debt agreement due?
- Debtor's Petition and Statement of Affairs submitted together (joint applicants on the same day); where a creditor made the person bankrupt, the Statement of Affairs within 14 days of notification; changes of name, address, income or employment reported to the trustee during the bankruptcy; a bankruptcy notice must be served within 6 months of issue and complied with within 21 days of service.
- What is the maximum penalty for Personal bankruptcy declaration or debt agreement?
- AFSA notes there may be penalties for not complying with a bankrupt's obligations and restrictions, and the trustee may extend the bankruptcy. Bankruptcy offence penalty amounts were not verified for this entry; check the Bankruptcy Act 1966 on legislation.gov.au
- What evidence is required for Personal bankruptcy declaration or debt agreement?
- Debtor's Petition and Statement of Affairs listing all debts, assets and income; any Trustee Consent to Act Declaration; income and mortgage statements and other financial information requested by the trustee; records of income contributions paid; notices of changed circumstances.
Source: https://www.afsa.gov.au/i-cant-pay-my-debts/bankruptcy/what-bankruptcy. Rules Mate is not a law firm. Always verify against the live regulator source before acting.