Bankruptcy is a legal declaration that an individual is unable to pay their debts.

Individuals can file for voluntary bankruptcy (also known as a debtor’s petition) or they can be put into bankruptcy by a court (through a creditor’s petition Court application).

People who become bankrupt are freed from most types of debt. However, they are still liable for five different types of debt:

• Court penalties and fines
• Child support and maintenance
• Government student loans (HECS and HELP)
• Debts where the amount owing has yet to be finalised
• Debts incurred after the bankruptcy starts

In Australia, only individuals can file for bankruptcy – not companies.