Is Bankruptcy the Right Choice for You?

Declaring bankruptcy is a double-edged sword. While it may offer you a clean slate to rid yourself of your debts and prepare for a more efficient financial afterlife, it also has some major drawbacks that may affect you in the future.

There are certain things to keep in mind when contemplating whether or not bankruptcy is the right choice for you.

Permanent record

The first thing you need to know is that you will be officially bankrupt for 3 years and 1 day. While after this period of time you will no longer be bankrupt, your name will appear permanently on the NPII. The NPII – National Personal Insolvency Index – is an online, public record of those who have completed proceedings under the Bankruptcy Act in Australia and is maintained by the Australian Financial Security Authority. This may affect your later interactions in life because anyone can check these records after paying a fee, including potential employers and landlords.

Credit limit

Your bankruptcy will also be recorded on a commercial credit reporting base for 7 years. This 7-year period begins on the date of your bankruptcy. If you want to apply for credit that exceeds $5,447 during your bankruptcy, you must inform the credit provider that you are bankrupt. Not disclosing this information may lead to prosecution.

Difficulties in insurance matters

Being on the NPII will also mean you may find it difficult to borrow money or renew and obtain insurance. In addition, you may also have to pay a bond before connecting gas and electricity to ensure that you pay the bills on time.


Your ability to travel can be hindered by bankruptcy. Your Trustee in bankruptcy will ask you to surrender your passport. If you wish to travel overseas, either for work or pleasure, then you need to ask your Trustee for permission. You will need to inform them of when you will return to Australia and if you fail to do so by the set date, your bankruptcy will be extended to 8 years.


If you are wondering whether bankruptcy is the right choice for you, then keep in mind that some employment options can be affected. There are certain professions that place restrictions on bankrupts or those who enter into an agreement under the Bankruptcy Act. This is something to seriously consider when you are deciding whether bankruptcy is the right choice for you. Some occupations, such as accountant and travel agent, have possible restrictions. You can view the full Employment Restrictions list on the Australian Financial Security Authority page to determine whether your profession will be affected.

Annual assessment of income

For each year of your bankruptcy, your Trustee will undertake a mandatory assessment of your income. If your Trustee finds that you earn over the threshold for statutory income contributions and are liable to make payments into your bankruptcy, that extra income will go to the people to whom you owe money.

Legally binding conditions

The conditions of a bankruptcy contract are legally binding. The terms and conditions are mandatory for you to follow and should you break them, you may make matters worse for yourself and end up in even more trouble.

For some, bankruptcy can be the light at the end of a long tunnel of debt. However, these are some of the consequences of bankruptcy to consider if you are wondering whether bankruptcy is the right choice for you.

If you are still uncertain if bankruptcy is the right choice for you or if you would like to talk about your options with an experienced expert, then contact our friendly team at Insolvency Services Australia on 1800 003 883.


CALL 1800 003 883 NOW