What happens when you go bankrupt in Victoria?
Bankruptcy is a legal process for people who can’t pay their debts. It’s administered federally by the Australian Financial Security Authority (AFSA), so the same rules apply across Victoria and Australia. Here’s what it generally means — and the parts people worry about most.
What bankruptcy actually is
When you become bankrupt — either by lodging a voluntary debtor’s petition or because a creditor obtains a sequestration order — a trustee is appointed to take control of your finances. Most unsecured debts are frozen and creditors generally can’t keep chasing you for them. In return, you give up control of certain assets and income above a set threshold.
Will I lose my house, car and super?
Super: money in a regulated superannuation fund is generally protected. Car and tools: you can usually keep a vehicle up to an indexed value and tools of trade up to a limit, plus ordinary household goods. Your house: this is the big one — any equity in your home vests in the trustee, who may sell it to pay creditors. If there’s little or no equity, options may exist to keep it, but this needs advice early.
How long does bankruptcy last?
Bankruptcy normally lasts 3 years and 1 day from when your statement of affairs is accepted, though it can be extended in some cases. During that time there are limits on overseas travel, running a business under certain names, and how much you can earn before making contributions.
The debts it clears — and the ones it doesn’t
Bankruptcy releases you from most unsecured debts (credit cards, personal loans, many utility and phone debts). It generally does not clear child support, court-imposed fines and penalties, or debts from fraud. Secured debts (like a mortgage or car loan) are treated differently, because the lender can still take the secured asset.
Alternatives worth considering first
Bankruptcy isn’t the only path. A Debt Agreement (Part IX) or a Personal Insolvency Agreement (Part X) can let you settle debts without full bankruptcy, and informal arrangements with creditors are sometimes possible. Which is best depends on your assets, income and who you owe — a lawyer or registered practitioner can map the options.
How to get help the easy way
You don’t have to work out who to call. Post your matter on ORLA Connect and up to four verified Victorian bankruptcy and insolvency lawyers review it and reply with how they can help and their fees. It’s free to post, private, and there’s no obligation to proceed.
Common questions
Will I lose my house if I go bankrupt?
How long does bankruptcy last in Australia?
Does bankruptcy clear all my debts?
Is there an alternative to bankruptcy?
Bankruptcy lawyers in Victoria
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Read more →Being sued or owed money?
How civil claims and debt recovery work.
Read more →This article is general information only and is not legal advice. Deadlines and thresholds can be strict and change over time — for advice about your situation, post your matter and a matched Victorian law firm can help.