Debt and bankruptcy: what should I know?
Bankruptcy is one possible response to debt you cannot pay, with serious and lasting consequences. It can also be initiated by a creditor. Before any decision, get free advice — it is rarely the only option.
This guide helps you
- Understand what bankruptcy broadly involves
- Know it can be voluntary or creditor-initiated
- See why it has lasting consequences
- Learn that alternatives often exist
- Find free help before making any decision
7 min
What's happening
Bankruptcy is a formal way of dealing with debts you cannot pay. It can be entered voluntarily, or a creditor can take steps to make you bankrupt, often beginning with a bankruptcy notice and then a court application. Bankruptcy has significant effects on your finances, certain assets, some types of work, and your credit record, and these effects last for a defined period and beyond.
Don't ignore it
If a creditor has started bankruptcy steps against you — such as serving a bankruptcy notice — the timeframes are strict and the stakes are high, so do not delay. Even if you are considering bankruptcy voluntarily, it is a major step that is hard to undo. Either way, get advice before you act or fail to act, because decisions made under pressure can have long consequences.
Step by step
- Get the full picture of your debts, income and assets.
- If you have received a bankruptcy notice, note any deadline and get advice immediately.
- Explore alternatives — a payment arrangement, hardship help, or a formal arrangement — with a financial counsellor.
- Get independent advice on the pros, cons and long-term effects of bankruptcy for your situation.
- Only proceed once you understand the consequences fully.
The detailed rules, thresholds and timeframes around bankruptcy are set nationally but are technical and change over time — do not rely on remembered figures; confirm current details or get advice.
Get legal help
Bankruptcy decisions deserve careful, independent advice rather than pressure from a debt collector or a fee-charging promoter. Legal Aid and community legal centres can advise, and a free financial counsellor on the National Debt Helpline 1800 007 007 can walk through all your options, including alternatives to bankruptcy.
Relevant organisations are listed in the bodies directory.
Where to get free help
Speak to a free financial counsellor via the National Debt Helpline on 1800 007 007, and contact Legal Aid or a community legal centre for legal advice — especially if a creditor has started bankruptcy steps. More background is at help.merion.com.au.
This is general information only and is not legal advice. Bankruptcy has lasting effects — get independent advice before deciding.
Key takeaways
- Bankruptcy can be voluntary or started by a creditor.
- It has serious, lasting effects on finances, some assets and work.
- Alternatives often exist — explore them with a financial counsellor.
- Always get free, independent advice before acting.
Frequently asked questions
Is bankruptcy my only option for big debts?
Often no. Payment arrangements, hardship help and other formal arrangements may suit better. A financial counsellor can compare options with you free of charge.
Can a creditor make me bankrupt?
In some circumstances a creditor can take bankruptcy steps, usually starting with a bankruptcy notice. The timeframes are strict — get advice immediately.
Should I use a company that advertises debt solutions?
Be cautious of fee-charging promoters. Free, independent advice from a financial counsellor or legal centre helps you avoid costly or unsuitable choices.
This is general information, not legal or financial advice. Your situation is unique and rules can vary by state and over time — for advice on your circumstances, speak to a free financial counsellor (National Debt Helpline 1800 007 007) or get legal help.
Know your options, know your rights
A free, plain-English guide to dealing with debt in Australia — and the people who can help.