bankruptcy

Does bankruptcy actually clear your debts?

Some debts aren't included in bankruptcy – here is what you need to know.

While bankruptcy is often viewed as a "clean slate", a common misconception is that it clears all of your debts. Declaring bankruptcy does mean that the large majority of your debts will be cleared so you won't have to pay them after your bankruptcy ends, but there are a few debts that are not included in this.

This guide will take you through what debts are and aren't included in your bankruptcy so you can make an informed choice about whether it's right for you.

Unsecured loan debt

Debt Will my debt be cleared by bankruptcy? Conditions
Credit card Yes -
Store card Yes -
Unsecured personal loan Yes -
Unsecured business loan Yes -
Trade creditor Yes -
Payday loan Yes -
Pawn shop loan Yes

You won't get your pawned item/s back.

Overdrawn account Yes -

Secured loan debt

Debt Will my debt be cleared by bankruptcy? Conditions
House mortgage Yes Your house is likely to be sold though.
Motor vehicle security Yes You will have to surrender your vehicle if the account falls into arrears or if the vehicle equity is worth more than the indexed amount.
Secured business loans YesNo You need to repay the debt or the secured asset may be sold.
Chattel mortgage YesNo You need to repay the debt or the secured asset may be sold.

Household debt

Debt Will my debt be cleared by bankruptcy? Conditions
Gas, electricity, phone, Internet, pay TV Yes

The supplier may choose to no longer supply you or may require a bond.

Outstanding rent where you live Yes

Check local laws to see your tenancy rights – your landlord may be able to terminate your tenancy agreement.

Outstanding rent at a place where you used to live Yes -
Debts from a property you damaged as a tenant Yes -

Centrelink, tax, fines, fees and court debts

Debt Will my debt be cleared by bankruptcy? Conditions
Legal fees Yes -
Medical fees Yes -
Accounting fees Yes -
State fines No -
Non-court state fines No -
Court-ordered restitution amounts Yes Only if the amount was fixed before your bankruptcy.
Taxation Yes

Your wage deductions may continue.

Child support No -
Centrelink Yes

Doesn't apply if your Centrelink was incurred by fraud.

HECS/HELP/SFSS debt No -

Other debts

Debt Will my debt be cleared by bankruptcy? Conditions
Victims of crime YesNo It depends on your state's laws and when or if the debt was registered.
Liquidated debts/liquidated damages Yes -
Unliquidated debts/unliquidated damages No

This is unless the debt is incurred by reason of a contract, promise or breach of trust.

Debts incurred after you enter bankruptcy No -
Provable debts incurred by fraud No -

Want to speak to someone about your debt?

Rates last updated November 19th, 2018
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