by Jeff Shute28.02.23

What happens when you declare bankruptcy?

You have established that you are unable to pay your debts, and you and/or your company has become insolvent. So, what happens now that you’ve made the decision, or the decision has been made by your creditor/s, to declare bankruptcy? Coming to the conclusion can be one of the hardest hurdles you’ve overcome, and the rest is just a process you need to follow, and then your legal requirements after bankruptcy. Here is what you can expect to happen when you declare bankruptcy. 

Apply for bankruptcy

You can’t simply decide you’re going through bankruptcy. There is a formal process to apply for bankruptcy that ensures your situation is insolvent. Why? Because of the implications to your creditors and your earning capacity once you do become legally bankrupt. Should you choose to voluntarily apply for bankruptcy yourself you will need to complete and submit a Debtors Petition by creating an online services account via the AFSA website. Alternatively, if you are unable to complete the online process, you can submit the bankruptcy form offline by contacting AFSA and requesting a Bankruptcy Form which will be sent via post. We can assist you with this process.

If your application is accepted, a confirmation letter will be sent to you and your creditors. If it is not accepted, AFSA will notify you in writing with the reasons why.


Once your application has been submitted and approved, the bankruptcy process itself is fairly straightforward. A trustee will first be appointed to your estate to manage, with applicable property taken away by them. Your part in the process is largely to cooperate with the process and the trustee, answering questions where required and being transparent about your assets and finances. 

A trustee can either be The Official Trustee, or a private registered trustee such as Shaw Gidley. They will handle unsecured creditor debt created prior to your bankruptcy, and the money from your assets and estate will be distributed to your creditors. 

After bankruptcy

There are regulations around what you can do after being declared bankrupt. We have developed a list of what to prepare for in life after bankruptcy here

There are also limits to what debts bankruptcy covers, which is important to understand at the onset of your application. It does not clear you of all debts, as can sometimes be the assumption. The following areas of debt and payment responsibilities that you are not free from after bankruptcy include, but are not limited to:

  • Child support payments and debts

  • HECS and HELP debt

  • Debts incurred since the date of bankruptcy

  • Court fees

  • Centrelink repayments

Are you considering applying for bankruptcy? Talk to our friendly and knowledgeable team today about how best to proceed, and gain a better understanding of what is to come.
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