Bankruptcy can be applied for in two ways:
A debtor’s petition, where you apply for bankruptcy yourself.
A creditor’s petition, where a creditor applies to a court to have the debtor declared bankrupt.
Debtor’s petition (voluntarily apply for bankruptcy)
To determine if you are eligible to apply for bankruptcy and to understand the process and consequences of bankruptcy please visit the Australian Financial Security Authority (AFSA) or the Australian Government Business for further information.
If you have reviewed the information on AFSA, sought advice from a financial counsellor/legal service and have established that applying for bankruptcy is an appropriate course of action for your personal circumstances follow AFSA’s guide to completing a Bankruptcy Form online. This application is made to AFSA not the Court.
Creditor’s petition (how a creditor applies to the Court to make a debtor bankrupt)
A creditor’s petition is a document lodged with a court by a creditor against a debtor. The purpose of the creditor’s petition is to ask the Court to make a debtor bankrupt. A court can do this by making a sequestration order against the debtor. The requirements of a creditor’s petition as set out in the Bankruptcy Act.
Before taking court action to make someone bankrupt there are formal mechanisms available to demand payment. Consumer protection laws are enforced by the Australian Competition & Consumer Commission (ACCC) and Australian Securities & Investment Commission (ASIC), they have published a guide on debt collection.
For more information see: Debt collection guideline for collectors & creditors.
How to apply
All new bankruptcy applications should be commenced using the bankruptcy forms approved under the Bankruptcy Rules.
The application must state the relief sought and will need to also state each section of the Bankruptcy Act, or regulation of the Bankruptcy Regulations, under which the proceeding is brought.
Any supporting documents must accompany the application.
Formal requirements for documents filed in bankruptcy proceedings in the Court are set out in subrule 1.07(5) and Form B1 of the Bankruptcy Rules and rules 2.01 to 2.04 of the GFL Rules. Formal requirements for affidavits filed in the Court are set out in rules 15.12 to 15.15 of the GFL Rules.
For more information see Guide for practitioners and parties in bankruptcy matters listed before a Registrar.
Common application types
If a debtor has committed an act of bankruptcy, a creditor may apply to the Court for an order that the debtor be made bankrupt and that the debtor’s estate be sequestrated and affairs managed by an external trustee. There are various ‘acts of bankruptcy’ that a creditor may rely on to present the creditor’s petition. The most common act of bankruptcy is non-compliance with a bankruptcy notice. A debtor fails to comply with a bankruptcy notice if the debtor does not pay the amount referred to in the notice within 21 days of the date of the notice.
Apply by filing a:
Information on how to present a creditor’s petition is available in Bankruptcy Information Sheet 1: Presenting a Creditor’s Petition
The creditor’s petition must be served by hand on the debtor.
Debtor’s application to set aside bankruptcy notice and extend time for compliance with the bankruptcy notice
A debtor has 21 days to comply with a bankruptcy notice or apply to have the bankruptcy notice set aside. The 21-day period continues to run even if the debtor has made an application to set aside the bankruptcy notice. The debtor may, therefore, also need to apply to have the time for compliance extended.
For an application to set aside a bankruptcy notice, a debtor must file an application and must state the final orders sought. In most cases, this will be an order that the relevant bankruptcy notice be set aside. The debtor may seek interim orders extending time for compliance with the bankruptcy notice until the application to set aside is heard. The debtor must state the legislative basis for the extension of time.
Apply by filing:
a Form B2 - Application, and
The affidavit must state:
the grounds in support of the application; and
the number of the bankruptcy notice and the date on which the bankruptcy notice was served on the applicant.
A copy of the bankruptcy notice must be attached to the application.
For more information on completing the Form B2 - Application to set aside a bankruptcy notice, see Bankruptcy Information Sheet 4: Setting aside a Bankruptcy Notice.
The applicant debtor must serve the application and supporting affidavit on the respondent creditor within 3 days after the application is filed.
Application to review exercise of registrar’s power
If a registrar has exercised a power and you wish to have the registrar’s decision reviewed, you can file an application for review. This application must be made within 21 days after the day on which the power was exercised
Apply by filing:
You will need to serve the application on each other party to the proceeding within 7 days after it is filed. Unless the Court or a registrar otherwise orders, the application does not stay the exercise of power under review.
If the application relates to a decision by the registrar to make a sequestration order against the estate of a debtor (the bankrupt), you must give notice of the application to each known creditor of the bankrupt by filing a:
Form B12 - Notice to creditors of application for review of Registrar's decision to make sequestration order
The review is a re-hearing (a hearing de novo). Any evidence that is not already before the Court must be filed and served in the usual way.
You will need to pay a filing fee to the Court when you file the application.
In some circumstances, you may be exempted from paying court fees, for example, if you are a concession holder. You will need to apply to the Court for the exemption, using the Application form for Exemption from Paying Court Fees – General. You can also apply for an exemption if paying court fees would cause you financial hardship. Use the Application form for Exemption from Paying Court Fees – Financial Hardship.
Filing with the Court
Wherever possible, you must file court documents commencing or relevant to an existing bankruptcy matter online using eLodgment. See the Federal Court website for information on how to use eLodgment. You may also eLodge documents regarding a proceeding including draft orders, consent orders, and case management correspondence.
If it is not possible to file using eLodgment, you may be able to file your documents in person, by mail, or in certain circumstances by fax or email. Contact the Court if you are not sure how to file the documents.
You can follow these instructions on how to use eLodgment or see the Federal Court website. Contact the Court if you are unsure how to file the documents.
Any documents filed in a proceeding must be served on all other parties to the proceeding.
If a party to be served is a corporation, service by hand is effected by leaving a copy of the application or notice with a person who appears to be an officer of the corporation or appears to be working for the corporation:
at the corporation’s registered office, or
if there is no registered office, at the corporation’s principal place of business or principal office.
If service by hand is required, the Court may substitute another way of serving the application.
To file an application for substituted service of a bankruptcy notice you must file:
a Form B2 – Application, and
an Affidavit stating the grounds in support of the application; and
a copy of the bankruptcy notice.
For more information about substituted service, see Bankruptcy Information Sheet 5: Substituted Service Applications.
After you have served the documents you need to file an Affidavit of service which proves to the Court that the application and/or document were served.