How Much Income Can A Bankrupt Earn?

One of the most common misconceptions about bankruptcy is that, once a person becomes bankrupt, they can no longer earn a substantial income or that their income will be severely restricted.

That is not the case.

Under Australia’s bankruptcy system, there is no limit on the amount of income a bankrupt person can earn. A person who voluntarily becomes bankrupt, or who is made bankrupt following a creditor’s petition, can continue to work and earn income. However, if their after-tax income exceeds a statutory threshold, they may be required to make compulsory income contributions to their bankruptcy estate.

The amount that a bankrupt may be required to contribute depends principally on their assessed income and the number of dependants they have. The thresholds are administered and indexed by the Australian Financial Security Authority (AFSA) and are updated twice a year.