COVID -19 changes: Bankruptcy

The Coronavirus (COVID-19) pandemic is a challenging time for everyone in Australia (and the world). This is a guide to the changes to bankruptcy the government has introduced because of the pandemic. It includes information on what to do if you think you may need to go bankrupt.


Read an overview on bankruptcy and how it works here.


On this page:

  • Three changes you need to know about

  • What do the changes mean?

  • Before you do anything

  • Early access to super

  • Some options to consider to avoid bankruptcy

  • Speak to one of our financial counsellors


Three changes you need to know about

  1. From 25 March 2020 until 25 September 2020 protections are in place to limit forced bankruptcy
  2. You cannot be forced into bankruptcy if the debt owed is under $20,000 (it was $5000 pre-pandemic)
  3. If you receive a bankruptcy notice (for a debt of more than $20,000) then the time you have to respond has been extended from 21 days to six months.


What do the changes mean?

It means it is now very difficult for a creditor to force you into bankruptcy until 25 September 2020. Effectively, it gives you six months to decide on a plan to manage your serious financial difficulty. It may mean you can avoid bankruptcy.

The COVID-19 pandemic also means that creditors may be more flexible on repayment arrangements and be more likely to accept reduced lump sum settlements.

Bankruptcy still may be the best option for some people. If so, you have time to consider the consequences and fill in the forms.


Before you do anything

Bankruptcy is a big decision and is a last resort for tackling your financial difficulty. If you own a home or any other real estate you need to be very careful before considering bankruptcy. The bankruptcy trustee can take and sell your home and other significant assets in bankruptcy.

You should always speak to a free financial counsellor before considering bankruptcy or any formal alternative to bankruptcy (Part IX Debt Agreement or Temporary Debt Protection). The financial counsellor will advise you on your options.


Early access to super

Super is usually protected if you go bankrupt.

If you seek early access to your super but still need to go bankrupt then you may have used money that you didn’t need to. Avoid early access to super if you can.

Some options to consider to avoid bankruptcy


Make an affordable repayment arrangement


You can negotiate affordable repayment arrangements with your creditors. Remember, not all debts are created equal. Some debts are a priority. For a step by step guide see Prioritise your debts.

Your priority debts or payments are:

  • food/water
  • rent or mortgage payments (you must have somewhere to live)
  • council rates or body corporate fees
  • loan payments for a car that is essential for getting to work, ferrying around children, shopping for essential goods or attending medical appointments
  • gas/electricity/water bills


Reduced lump sum settlements

If you have any savings or can put together a lump sum, however small it may bey, consider offering a creditor a reduced sum as full and final settlement for an unsecured debt.


Ask your creditor about not charging fees, and reducing or stopping interest

Now is the time to ask your creditors for help so you can pay off your debts and avoid bankruptcy. Remember, your creditor would rather be paid something than get nothing.


Speak to one of our financial counsellors

If your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak with one of our financial counsellors.


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