Impact of Bankruptcy on my Debts and Assets


Most unsecured provable debts that you are responsible for at the time that you are made bankrupt will form a part of your bankruptcy.  These debts will be wiped at the end of your bankruptcy and you will emerge debt free ready to start your life afresh.

These debts will include :

  • Any debts resulting from guaranteeing someone else’s debt. Such a debt should be included on the bankrupt’s statement of affairs as a debt.
  • A bankrupt will also be released from debts that have been guaranteed by someone else. The guarantor will not be released from the debt.
  • Debts owed to friends and relatives usually result from a verbal contract. These debts should be shown on the statement of affairs as unsecured debts.

Your creditors who are expecting payment for your provable debts will be liasing with the bankruptcy trustee to collect monies for these debts. Sometimes they will need to accept some cents on a dollar, sometimes more and occasionally nothing at all. There are different categories of debts that will not be wiped as a result of your bankruptcy.


Provable debts not wiped by bankruptcy

  • incurred by dishonestly through attempt to defraud someone
  • debts incurred under a maintenance agreement order
  • debts incurred as a result of bond obligations for criminal activities

Child maintenance debts under a maintenance agreement or order, and child support debts, are provable in bankruptcy. However, a bankrupt is not released from maintenance debts or child support debts. Tax debts for the period before the date of bankruptcy are provable and extinguished after bankruptcy.


Non Provable Debts

Non-provable debts are not eliminated by bankruptcy and include:

  • debts incurred following your bankruptcy date;
  • court fines;
  • HECS debts incurred for education ;
  • unliquidated damages yet to be determined by a court.


Secured Debts

Secured debts such as mortgages or car loan remain n force despite your bankruptcy because your lender has the right to repossess these assets if you default on your loans.
If you have any equity remaining in your property after taking your mortgage into account your bankruptcy trustee will most likely force the sale of your property including your home to repay some of your debts.



Under the rules of bankruptcy the bankrupt is allowed to maintain some personal assets including work tools, a car, some furniture, small balances in bank accounts etc.

The thresholds and limits applicable to these are set out by ITSA and are updates quarterly to remain in line with CPI.

You should be able to keep:

  • Essential furniture items and personal effects. .
  • A basic motor vehicle (valued less than set out by ITSA)
  • Small balances in bank account (limits set by ITSA)
  • Superannuation and life insurance policies.
  • Compensation payments for personal injury.
  • Tools of Trade used to earn income up to a determined value set out by ITSA.
  • Property held in trust for others.



Any property you may have disposed of for less than market value within a certain period prior to bankruptcy may be able to be claimed by the trustee.


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