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

DebtWill my debt be cleared by bankruptcy?Conditions
Credit cardYes-
Store cardYes-
Unsecured personal loanYes-
Unsecured business loanYes-
Trade creditorYes-
Payday loanYes-
Pawn shop loanYes

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

Overdrawn accountYes-

Secured loan debt

DebtWill my debt be cleared by bankruptcy?Conditions
House mortgageYesYour house is likely to be sold though.
Motor vehicle securityYesYou 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 loansYesNoYou need to repay the debt or the secured asset may be sold.
Chattel mortgageYesNoYou need to repay the debt or the secured asset may be sold.

Household debt

DebtWill my debt be cleared by bankruptcy?Conditions
Gas, electricity, phone, Internet, pay TVYes

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

Outstanding rent where you liveYes

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 liveYes-
Debts from a property you damaged as a tenantYes-

Centrelink, tax, fines, fees and court debts

DebtWill my debt be cleared by bankruptcy?Conditions
Legal feesYes-
Medical feesYes-
Accounting feesYes-
State finesNo-
Non-court state finesNo-
Court-ordered restitution amountsYesOnly if the amount was fixed before your bankruptcy.

Your wage deductions may continue.

Child supportNo-

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


Other debts

DebtWill my debt be cleared by bankruptcy?Conditions
Victims of crimeYesNoIt depends on your state's laws and when or if the debt was registered.
Liquidated debts/liquidated damagesYes-
Unliquidated debts/unliquidated damagesNo

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

Debts incurred after you enter bankruptcyNo-
Provable debts incurred by fraudNo-

Want to speak to someone about your debt?

Rates last updated May 27th, 2018
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