Is there a downside to filing for bankruptcy?

Frequently Asked Questions

I gamble. How much trouble am I in?

We often get asked by people who are considering bankruptcy, what are the ‘positives and negatives of bankruptcy’ and what legislation applies to bankruptcy.

Bankruptcies in Australia are administered under the Bankruptcy Act. The intent of this legislation is to resolve extreme financial problems.

To assist you to consider bankruptcy, we have provided below our summary list of the pros and cons of bankruptcy. We encourage you to give us a call on 1300 097 926 or email if you would like to explore the pros and cons of bankruptcy relevant to your circumstances.

Firstly, we give you the Pros or Positives of Bankruptcy and they are:

• Bankruptcy gives you a fresh start to reset and get going again.
• Bankruptcy will permanently cancel most of your debts. This includes credit card debt, payday loans, personal loans, the shortfall on secured debt, guarantees and the list goes on. Rather than writing a long list of debts bankruptcy cancels, it is easier to list the debts that are not extinguished by your bankruptcy. Debts not extinguished by your bankruptcy are social debts and debts which cannot be quantified. For example, fines imposed by the court, HECS Debts, Debts resulting from Fraud, CSA child support liabilities, and debts that a court is yet to specify how much you owe.
• The super you have accumulated over time is protected and remains available for your retirement.
• The super your employer pays during your bankruptcy is protected for your retirement.
• Once you are bankrupt, you can save money from your wages and there is no limit on the amount you can save. Your savings are protected provided they remain in your bank account.
• When you are discharged from bankruptcy, your savings from your wages during bankruptcy that remain in your bank account are yours.
• Your household furniture and effects are protected
• Your tools of the trade are protected up to a dollar limit. Currently this amount is $3,950. This amount is regularly adjusted for CPI
• You can keep cars and motorbikes up to a total value of $8,550. This amount is regularly adjusted for CPI
• You can keep cars and bikes subject to a lease or hire purchase provided the total equity does not exceed $8,550 and you continue to make the monthly loan payments.
• Your income is protected to make sure you have money to live. If you are a high-income earner this protection is maintained but you may have to pay some money to your bankrupt estate. This is called income contributions.
• Your creditors and their debt collectors will stop hassling you, as you no longer owe the money. They are unable to continue debt collection court proceedings against you.
• You can operate a business in your own name while bankrupt without disclosing your bankruptcy. However, if you have a customer for whom you supply goods or services worth more than $6,273 you will need to disclose your bankruptcy to that customer.
• You can travel overseas while bankrupt, you just have the inconvenience of first obtaining your Trustee’s written permission.
• You may be able to remain living in your own home.
• You can file for bankruptcy without leaving your home. You do not have to go to court to become bankrupt, creditors are not told till after you have become bankrupt, it is completely private with no media involvement.
• If you are unable to pay your debts when they are due and are a resident of Australia, you can apply for bankruptcy. There is no minimum amount you must owe and no lodgement fees.
• No one knows you are bankrupt except those you chose to tell, your creditors, your bank, Solicitor and Accountant.
• Your bankruptcy is not advertised in the papers.
• You will be you again with peace of mind, improved health, and being able to sleep.

Now we give you the Cons or Consequences of Bankruptcy and they are:

• Bankruptcy lasts for 3 years and 1 day.
• You cannot buy assets while you are bankrupt, for example, a boat or shares in a company.
• If you are involved in litigation, you may not be able to continue the Court proceedings
• Bankruptcy is shown on your credit record during your bankruptcy and for a further two years.
• You will have difficulty borrowing money while your bankruptcy and any prebankruptcy defaults are shown on your credit record.
• Bankruptcy may negatively impact licenses you hold that are relevant to your earning an income. You should make inquiries on the effect bankruptcy will have on your registrations and if appropriate, your employment contract.
• Bankruptcy is shown permanently on the National Personal Insolvency Index (NPII), which is maintained by the Federal Government.
• You cannot be a Trustee of a Self-Managed Super Fund whilst you are bankrupt.
• You cannot be a director of a company while bankrupt.
• If you are going to incur credit of more than $6,273 while bankrupt, you must first disclose your bankruptcy to the lender.
• If you receive an unexpected or expected windfall while you are bankrupt, like a lottery win, gambling win, or inheritance, the money is required to be paid to your bankrupt estate. If this happens to you and there are sufficient funds to pay your creditors, then creditors and the cost of your bankruptcy will be paid by the bankruptcy trustee and your bankruptcy will be annulled. Funds left over will then be paid to you by the bankruptcy trustee.

The Bankruptcy Act, 1966 has been designed to resolve your financial problems and release you from most debts you cannot pay. If you do not play ball and do the wrong thing there can be harsh penalties.

We hope our summary lists have helped you. We are here to help you Understand Bankruptcy. If you would like to discuss your situation and how bankruptcy would work for you, give us a call on 1300 097 926 or email

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