Making someone bankrupt

If a person (or debtor) owes you or your business more than $5,000 you may be able to apply to make them bankrupt.

Before making someone bankrupt

If a person is having trouble paying their debts, they may approach you as a creditor for assistance. Creditors are encouraged by consumer protection laws to take a flexible approach to payment arrangements.

Consumer protection laws are enforced by the Australian Competition & Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC). Together they have published a guide you may find useful.
For more information see: Debt collection guideline for collectors & creditors.

If it isn't possible to come to an arrangement directly with a debtor, debt collection agencies may help you recover the debt. Seek legal assistance for advice on your rights and options available to you.

Process to make someone bankrupt

If you want to apply to make someone bankrupt, we recommend seeking independent legal advice, as it can be complex.

The steps below outline the process.

  1. Get a court judgment or order
    See: Judgments & orders

  2. Apply for a bankruptcy notice
    See: How do I apply for a bankruptcy notice?

  3. Serve the bankruptcy notice
    See: Serve, amend or extend a bankruptcy notice

  4. File a creditor’s petition with the courts
    See: File a creditor's petition.

  5. The Sequestration order
    If a court accepts your creditor's petition[?], they may grant a Sequestration order[?]. This makes the person bankrupt.
    For more information see: Official Receiver Practice Statement 3 - Bankruptcy by sequestration order.

Filing documents

Throughout the process, you need to register certain documents with us.
For more information see: Which creditor documents do I need to file with you?

How to appoint a trustee

You can choose to appoint a particular trustee to manage the bankruptcy. A full list of all trustees can be found at Registered trustees contact list.

To appoint a trustee, the trustee must complete a Consent to act as trustee form.

It’s not mandatory to appoint a trustee.  If you don’t, we'll appoint one on your behalf. This could be either a:

  • registered trustee[?] or
  • the Official Trustee in bankruptcy[?] (AFSA).

What happens once I make the person bankrupt?

  • We notify the person of their bankruptcy.
  • We send the person a statement of affairs[?], which they will need to complete and return within 14 days.
  • The 3 year and 1 day bankruptcy period will not begin until we accept the statement of affairs.

Once we register the bankruptcy

  • The trustee will manage the bankruptcy and investigate if they can claim assets to pay creditors.
  • The individual may need to make compulsory payments[?] if they earn over a set amount.
  • If payments are available to creditors, the trustee will contact you with further instructions.
    For more information see: The person is bankrupt - what happens now?

Deceased estates

If someone passes away in debt, it may be possible to make their deceased estate bankrupt.
For information see: Making a deceased estate bankrupt

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