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.