Three types of bankruptcies in Australia

Bankruptcy, in plain terms occurs when an individual cannot repay their debts and there is no foreseeable change in their circumstances that would allow them to repay their debts in the future. There are three relevant options available to individuals under the Bankruptcy Act 1996 (the Act). Firstly, a person can voluntarily declare bankruptcy, they can enter into a debt agreement with their creditors or enter into a personal insolvency agreement. These three different options available under the Act are tailored for individuals in different circumstances.

When a person is declared bankrupt (the Bankrupt) they must appoint a trustee or in some circumstances a trustee is appointed for them. The role of the trustee is to administer and manage the bankrupt's estate. The trustee will look for assets in the bankrupt's name to sell in order to pay off the bankrupt's creditors.