- 1A creditor can petition the court to make an individual bankrupt if they owe at least the statutory minimum and have committed an act of bankruptcy.
- 2The most common act of bankruptcy is failing to comply with a bankruptcy notice.
- 3Once a sequestration order is made, a trustee takes control of the debtor's divisible property for the benefit of all creditors.
When a creditor's petition is available
A creditor's petition asks the court to make a sequestration order — an order making the debtor bankrupt. Broadly, the creditor must be owed a liquidated debt at or above the statutory minimum, and the debtor must have committed an act of bankruptcy within the previous six months.
The most common act of bankruptcy is failing to comply with a bankruptcy notice. The petition is filed in the Federal Circuit and Family Court of Australia or the Federal Court of Australia.
The usual steps
- ✓Obtain a final judgment or order for the debt.
- ✓Apply for a bankruptcy notice and serve it on the debtor.
- ✓If the notice is not complied with within the time allowed, prepare and file the creditor's petition within the required period.
- ✓Serve the petition and attend the hearing, where the court decides whether to make a sequestration order.
What happens after bankruptcy
Once the debtor is bankrupt, a trustee — either the Official Trustee or a registered private trustee — takes control of the debtor's divisible property, investigates their affairs and realises assets for creditors. Creditors lodge proofs of debt and receive dividends from what is recovered.
The petitioning creditor's costs are generally paid in priority from the estate, but there is no guarantee of recovery — it depends on what assets the trustee can realise.
Is bankruptcy the right strategy?
Bankruptcy is powerful because it is serious. Many debtors pay, or propose a genuine arrangement, once served with a bankruptcy notice. Where the debtor has assets — such as equity in real property — a petition can unlock recovery that ordinary enforcement cannot.
Where the debtor has no assets, bankruptcy may not produce a return. We assess the likely outcome with you before each step so that costs are weighed against realistic recoveries.
Common questions
How much must be owed to bankrupt someone?+
The debt must be at or above the statutory minimum set under the Bankruptcy Act 1966 (Cth). We confirm the current threshold and whether your debt qualifies when we review your matter.
Can the debtor stop the petition?+
A debtor may be able to oppose the petition — for example by showing they are solvent, by paying the debt, or by raising a defect in the process. The court decides at the hearing.
Sources & further reading
- ↗Australian Financial Security Authority (AFSA) — creditor's petitions and statutory minimum
- ↗Federal Circuit and Family Court of Australia — filing a creditor's petition
- ↗Federal Register of Legislation — Bankruptcy Act 1966 (Cth)
This guide is general information about Queensland and Australian law and is not legal advice. Laws change and every situation is different — speak with us about your specific circumstances before acting.
