Last updated 30 November 2022
Who can become bankrupt?
Individuals resident in Australia or non-residents who have an Australian connection can choose to become or be made bankrupt. This includes people who do not operate a business, who are in business as sole proprietors or in partnership, and people with joint debts.
Who cannot become bankrupt
Insolvent companies are administered or wound up under the Corporations Act 2001 (Cth). Directors of companies who have given personal guarantees to creditors of the company, or who are found by a court to have allowed their company to trade while it was insolvent, may be made liable for some or all of the company’s debts and be made bankrupt if they do not pay those debts personally. The Australian Securities and Investments Commission and the Australian Financial Security Authority may cooperate to investigate the financial affairs of a director of an insolvent company who becomes bankrupt.
People who can pay their debts
People may have their bankruptcy petition rejected when it appears they have sufficient money or assets that they are able to convert reasonably easily into money to pay all of their debts, and have been bankrupt at least three times or bankrupt at least once in the last five years.
People lacking capacity to manage their own financial affairs
Generally, a person who has power of attorney is not empowered to petition for bankruptcy on behalf of the person who does not have capacity to manage their own financial affairs. A person may apply to the Queensland Civil and Administrative Tribunal to have the affairs of a person who lacks capacity administered. An application may then be made to petition for bankruptcy.
It is not possible for a creditor to bankrupt someone who is legally unable to sufficiently understand their own financial affairs to commit an act of bankruptcy.