While you are in bankruptcy, Centrelink are not able to: –
- make deductions from your payments,
- require you to make payments by instalments,
- garnish your bank accounts, or
- take court actions to recover the debt.
After being discharged from bankruptcy, usually most debts are cleared, however, Centrelink debts are a bit more complicated. The general rule is that bankruptcy will extinguish a Centrelink debt, unless the bankrupt has incurred the debt due to his or her fraud (s153(2)(b)Bankruptcy Act 1966).
To understand what constitutes a debt incurred by fraud, case law indicates that a debtor needs to have committed a deliberate or reckless act with complete disregard for the truth or otherwise of the information that he or she has provided. Where false representations were made knowingly, without belief in its truth or otherwise (Skalkos v Smiles & Ors  NSWSC 192).
An example of a debt incurred by fraud may be a Centrelink overpayment resulting from a person deliberately claiming a benefit to which they were not entitled.
If the Centrelink Debt has been incurred by or involving fraud, then the debt will not be extinguished by bankruptcy and will still be payable after your discharge from bankruptcy.
If you have a Centrelink debt or other debts that you are struggling to pay and would like advice or more information on the options that may be available to you, including bankruptcy, please feel free to call the team at Shaw Gidley to speak with an experienced, independent advisor for a confidential and informal discussion in relation to your individual circumstances.