Bankruptcy

The Attorney-General has responsibility for bankruptcy policy, the Bankruptcy Act 1966 and the Australian Financial Security Authority (AFSA).

The Bankruptcy Act regulates Australia's personal insolvency system and provides a framework to allow individuals in severe financial stress to discharge unmanageable debts while providing for the realisation of a debtor's available assets for distribution to affected creditors.

The Bankruptcy Act provides debtors with the following formal options to resolve their personal insolvency:

bankruptcy is a legal process where you declare bankruptcy, or a court declares you bankrupt, because you are unable to pay your debts
debt agreements are legally binding agreements between debtors with low to moderate levels of debt, assets and income, and creditors. A debt agreement can be a flexible way to come to an arrangement to settle debts without becoming bankrupt
personal insolvency agreements (PIAs) are legally binding agreements between a debtor and their creditors and can offer a flexible arrangement to settle debts without becoming bankrupt.

Entering bankruptcy, a debt agreement or a personal insolvency agreement is a serious decision and can have significant implications. Individuals considering them should seek the advice of a financial counsellor.

The National Debt Helpline provides a free financial counselling service to help individuals manage their debt and can be contacted on 1800 007 007.

Additional information about the support and services available to help make financial decisions is available on the moneysmart website. This includes information about financial assistance and counselling.

Bankruptcy threshold increased to $10,000

On 1 January 2021, the bankruptcy threshold permanently changed to $10,000.

The $10,000 threshold accounts for the changing value of money and debt levels since the threshold was last permanently increased to $5,000 in 2010. The increase of the threshold to $10,000 also addresses concerns about the use of bankruptcy proceedings to pursue small debts without reducing the general availability of credit in the economy.

The bankruptcy threshold of $10,000 applies to bankruptcy notices issued, or creditors' petitions presented on, or after, 1 January 2021.

Ministerial Roundtable on Personal Insolvency

On 2 March 2023 the Attorney-General, the Hon Mark Dreyfus KC MP, convened a national roundtable with key stakeholders across all sectors of the personal insolvency system.

The roundtable provided an opportunity for practitioners and groups representing both creditor and debtor interests to engage directly with the government to discuss the pressure points in the current system, critical reform areas and longer-term strategic challenges.

A summary of this roundtable is found below.

Australian Financial Security Authority

The Australian Financial Security Authority (AFSA) is responsible for the administration and regulation of Australia's bankruptcy system through the delivery of information, regulation and enforcement services.

The AFSA website has information about: