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How to make someone bankrupt in Australia

In January 2021, the Australian government amended the Commonwealth bankruptcy regulations to adjust the threshold for triggering bankruptcy from $20,000.00 to $10,000.00. Therefore, if someone owes you or your business $10,000.00 or more, then you may be eligible to apply to the courts to make them bankrupt. This article will explore the consequences of bankruptcy and the procedure of making someone bankrupt.

Meaning of bankruptcy

In Australia, bankruptcy refers to the legal status imposed by the Bankruptcy Act 1966 (Cth) (‘the Act’) upon individuals only. The Act confers the assets of the debtor in a trustee for sale. The sale proceeds are distributed to the creditors until the debtor’s indebtedness is fully discharged. Assets may include real estate, cars and savings in a bank account.

The normal term of the bankruptcy is three years, but it may be extended to eight years depending on the debtor’s conduct and affairs. During this period, the debtor has a duty to assist the trustee and an obligation to make contributions to the bankrupt estate. The debtor is also restricted from obtaining credit and travelling outside of Australia.

The Australian Financial Security Authority (‘AFSA’) is responsible for the regulation and administration of the bankruptcy system in Australia.

Steps to make someone bankrupt

1. Obtain a court judgment or order

The judgment or order must show that the person owes you $10,000.00 or more.

2. Check the National Personal Insolvency Index (‘NPII’)

The NPII outlines all people who are bankrupt in Australia.

3. Apply for a bankruptcy notice online

A bankruptcy notice is a formal demand for payment based on the judgment or order. Further details on how to apply are available on the AFSA website and an application fee is a payable.

4. Serve the bankruptcy notice

You must serve the bankruptcy notice within six months of the date it was issued by AFSA. Methods of service include personal delivery, post and email. If the notice cannot be served, then you can apply to the courts for an order of substituted service. To comply with the notice, the debtor can arrange a suitable payment by instalment plan with you.

5. File a creditor’s petition in the Federal Court of Australia or the Federal Circuit Court of Australia.

A creditor’s petition must be supported by the debtor’s act of bankruptcy within six months before the presentation of the petition. Acts of bankruptcy are listed in s 40 of the Act. The most common one is a failure to comply with a bankruptcy notice.

Furthermore, a creditor’s petition must be:

a) in the prescribed form;

b) executed by or on behalf of each creditor;

c) supported by an affidavit verifying the factual matters it contains; and

d) personally served on the debtor unless an order for substituted service is obtained.

6. Appoint a trustee

The trustee will manage the bankruptcy and investigate whether they can claim assets to pay creditors. A full list of trustees is available on the AFSA website.

7. Obtain a sequestration order

If the court accepts your creditor’s petition, it may make a sequestration order to make the debtor bankrupt.


Demanding payment by way of bankruptcy should be the last resort given that it is a costly, technical and lengthy process. If a debtor owes you a large sum of money, you need to act quickly. Our team at Legal Point Lawyers can simplify the process for you and enhance your chances of recovering the money owed to you.


This publication provides general information of an introductory nature and is not intended and should not be relied upon as a substitute for legal or other professional advice. While every care has been taken in the production of this publication, no legal responsibility or liability is accepted, warranted, or implied by the authors or our firm, and any liability is hereby expressly disclaimed.

Ge Wu is the solicitor director of Legal Point Lawyers & Attorneys.  He has been admitted to practise law since 2005.  Throughout his practice, Ge Wu predominantly practises in the areas of Property Law, Immigration Law, Commercial Law, Civil Litigation and Family Law.

His experience covers all aspects of property law, commercial/retail lease, immigration law and civil litigation, while at the same time, he also has experience in family law, criminal law and other areas such as will-drafting and general advice.

He has frequently been instructed by corporate clients in pre-acquisition due diligence reports, structuring property development, land/shopping centre acquisitions, G.S.T. and stamp duty advice for buying/selling businesses, as well as share transfers and company re-structures.

Ge Wu has been appointed as Notary Public since 2011 and started to provide Notary Public service to clients from different cultural backgrounds.

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