Glossary of Terms

To ensure you have the right information, below is a Glossary of Terms useful throughout your bankruptcy application. These terms are often referenced throughout your Bankruptcy Application.

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Act of bankruptcy
An action, event or declaration listed in sections 40 of the Bankruptcy Act 1966 which can be used by a creditor to apply to the court to make a person bankrupt. An act of bankruptcy must be established before the court may make a sequestration order against the estate of the debtor. Refer to sections 40 and 43 of the Bankruptcy Act 1966.
Antecedent transaction
A transaction that has taken place prior to a personal insolvency agreement or bankruptcy that is void against the trustee. They include transactions where less than market value has been paid for an asset, a transfer has been made to prevent the property becoming divisible among creditors, or preferential payments are made to a specific creditor. A trustee has the ability to recover the asset or the difference between the price paid and the value at the time of the transfer.


A process where people, who cannot pay their debts, become bankrupt to receive the protection of the Bankruptcy Act 1966 and their estate is administered by a trustee. It allows for the fair distribution of property among creditors and the prosecution of dishonest debtors.
Bankruptcy Act 1966
The Commonwealth legislation which covers personal insolvency, including bankruptcy, Part IX (debt agreements) and Part X (personal insolvency agreements) arrangements. It deals with individuals. Corporate entities are covered by the Corporations Law administered by the Australian Securities and Investments Commission.
Bankruptcy notice
A formal, final demand for payment of a debt by a creditor owed at least $5000 on one or more final judgments or final orders. This notice is issued by the Official Receiver at the request of creditor(s), who must have judgments (from a court of competent jurisdiction) to back up their claim that they are owed money. Failure to comply with a bankruptcy notice constitutes an act of bankruptcy.
Bankruptcy Register Search (BRS)
The BRS is an AFSA online service that accesses information from the National Personal Insolvency Index (NPII) for a fee.


A form of security that ensures the repayment of a debt (or the performance of an obligation) by providing that, should the debt not be repaid, the creditor has rights to be paid, usually out of the proceeds of the sale of an asset.
A sum of money calculated on the basis of a statutory formula applied to the bankrupt’s income which is required to be regularly paid to the trustee. It is also called a compulsory contribution.
Controlling trustee
A person (a registered trustee, the Official Trustee or an eligible solicitor) who investigates a debtor’s financial affairs and calls a meeting of the debtor’s creditors under Part X of the Bankruptcy Act.
In the context of bankruptcy, the court usually refers to the Federal Court of Australia or the Federal Circuit Court of Australia. Both of these courts can hear matters associated with personal insolvency.
A person or company to whom money is owed.
Creditor’s petition
An application from a creditor to a court seeking to make a debtor involuntarily bankrupt (see sequestration order).


A long-term security, earning a fixed rate of interest, issued by a company and secured against asset(s).
Debt agreement
An arrangement between a person who cannot pay their debts and their creditors. It is a formal arrangement under Part IX of the Bankruptcy Act. A debt agreement results from creditors voting to accept a proposal from a debtor to settle their debts. To be eligible to propose a debt agreement, a debtor must be insolvent and meet threshold levels relating to unsecured debts and assets and after-tax income.
Debt agreement administrator
An eligible person nominated by a debtor to handle a debt agreement on their behalf.
Debt agreement proposal (DAP)
A proposal to enter into a debt agreement. This proposal is put to creditors to vote upon.
Debt agreement proposal lodgment fee
The fee payable when a debtor lodges a DAP.
A person who owes money to a creditor.
Debtor’s petition
An application made to AFSA to become a bankrupt.
Debts not extinguished by bankruptcy
These are debts that a bankrupt is still liable to pay after discharge from bankruptcy. The debts may or may not be provable – that is:
  • some are provable and not extinguished: eg child support debts
  • some are not provable and not extinguished: eg HECS/HELP and SFSS debts; fines or penalties imposed by a court.
Provable debts that were incurred by fraud are not extinguished.
Declaration of intention to present a debtor’s petition (DOI)
A device whereby a debtor may seek temporary relief from recovery action taken by a creditor. Once such a declaration is accepted by AFSA, it prevents unsecured creditors from enforcing their debts for a period of 30 days.
Discharge from bankruptcy
The end of bankruptcy. The date of discharge is the day after bankruptcy ends. The statutory period of bankruptcy is three years and one day from when a person files their statement of affairs with the Official Receiver, but this period can be extended in certain circumstances (see objections to discharge from bankruptcy). A bankrupt will never be discharged if they have not filed their statement of affairs with the Official Receiver.
Discharged bankrupt
A person whose period of bankruptcy has ended.
A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, paid to its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.
Divisible assets or divisible property
Assets/property that can legally be sold in bankruptcy by the trustee.


Exempt assets
Assets/property which cannot be sold in bankruptcy by the trustee. These are identified in s116 of the Bankruptcy Act.


Final judgment
A judgment which finally determines the issues between the parties in a proceeding. A bankruptcy notice must be founded on a ‘final judgment order’.
Financial counsellor
A person who gives confidential and independent assistance to people with financial problems. Financial counselling services are usually provided by community or welfare organisations and are provided free of charge.


An automatic deduction arranged without a person’s consent (generally from their income or bank account) due to non payment of a debt. A trustee in bankruptcy can garnishee income or monies held by third parties on behalf of a bankrupt, where the bankrupt has been assessed as liable to pay a sum of money from their income as a contribution to their bankrupt estate and fail to make payments.


With reference to s139T of the Bankruptcy Act, if a person has been assessed as having an income contribution liability and is unable to pay for a certain reason (from an exhaustive list), the liability can be reduced by the trustee. The list of acceptable reasons is as follows:
  1. the bankrupt or a dependant of theirs suffers from illness/disability and there are ongoing medical costs
  2. child care costs when the bankrupt relies on this child care to continue their employment
  3. rent costs (other than for government-provided accommodation) where the bankrupt must pay them wholly or substantially from his or her income
  4. substantial costs incurred in travelling to or from work
  5. somebody who lives with the bankrupt and usually paid for household expenses is no longer able to contribute to these expenses due to unemployment, illness or injury
  6. any other reasons prescribed in the Bankruptcy Regulations (none currently prescribed).


Indexed amounts
These are amounts that are periodically adjusted in accordance with the consumer price index. Some are adjusted every quarter, others every six months. As an example they identify the value of assets that can be retained by a bankrupt or the income a bankrupt can earn before they are required by law to contribute towards their bankruptcy.
A person is considered to be insolvent when they are unable to pay their debts as and when they fall due.


An obligation or responsibility to do something (such as repay a debt).


National Personal Insolvency Index (NPII)
The electronic record of all personal insolvency administrations in Australia which can be accessed by anyone for a fee. This computerised database contains information on proceedings and administrations under the Bankruptcy Act 1966.


Objection to discharge from bankruptcy
A period of bankruptcy can be extended by a trustee. When this happens, the trustee lodges an objection with the Official Receiver at AFSA. Once it is registered on the National Personal Insolvency Index, it is a valid objection. A trustee can lodge an objection if a bankrupt fails to cooperate, or fails to meet the requirements of the Bankruptcy Act. In this instance, a bankruptcy can be extended to a five or eight year period from the date the bankrupt files their statement of affairs with AFSA through the Official Receiver. In certain circumstances, where a bankrupt has left Australia, the period of bankruptcy does not commence until the bankrupt returns.
Official Trustee in Bankruptcy (OT)
The Official Trustee in Bankruptcy, a body corporate, administers bankruptcies and other personal insolvency arrangements when a registered trustee or other administrator is not appointed. The Official Trustee also has responsibility under the Proceeds of Crime Act 2002 and the Customs Act 1901 to control and deal with property under court orders made under these statutes. The Official Trustee is represented by staff from the Australian Financial Security Authority, or AFSA.
Overseas travel application fee
A fee payable by a bankrupt when requesting the Official Trustee to grant consent to travel overseas.


Personal insolvency agreement (PIA)
Under Part X of the Bankruptcy Act, a personal insolvency agreement results from creditors accepting a debtor’s proposal to settle his or her debts. Unlike debt agreements, personal insolvency agreements are not subject to income, asset or debt thresholds.
Prescribed information
This is information that MUST be read by a debtor before making an application for bankruptcy or submitting a proposal to AFSA for a debt agreement under the Bankruptcy Act.
Private bankruptcy trustee
See registered trustee.
Provable debt
A debt covered by bankruptcy. This is an amount that a creditor is entitled to claim for in a bankruptcy. If it is accepted by the trustee the creditor will participate in any distribution that may arise by way of a dividend.


Real estate
Realty including vacant land, houses, units or commercial properties in Australia and overseas. Time shares are excluded.
Registered trustee
A person registered with AFSA on the National Personal Insolvency Index (NPII) and registered to administer bankruptcies, personal insolvency agreements and debt agreements under Part X of the Bankruptcy Act.
Related creditor
A creditor who is a related entity.
Related entity
A related entity includes:
  1. a relative of the person;
  2. a body corporate of which the person, or a relative of the person, is a director;
  3. a body corporate that is related to the body corporate referred to in paragraph (b);
  4. a director, or a relative of a director, of a body corporate referred to in paragraph (b) or (c);
  5. a beneficiary under a trust of which the person, or a relative of the person, is a trustee;
  6. a relative of such a beneficiary;
  7. a relative of the spouse, or de facto partner, of such a beneficiary;
  8. a trustee of a trust under which the person, or a relative of the person, is a beneficiary;
  9. a member of a partnership of which the person, or a relative of the person, is a member;
A relative means:
  1. the spouse of the person; or
  2. a parent or remoter lineal ancestor of the person or of the person's spouse; or
  3. a child or remoter lineal descendant of the person or of the person's spouse; or
  4. a brother or sister of the person or of the person's spouse; or
  5. an uncle, aunt, nephew or niece of the person or of the person's spouse; or
  6. the spouse of a person specified in paragraph (b), (c), (d) or (e).
Reverse mortgage
A mortgage agreement allowing a homeowner to borrow against home equity and receive tax-free payments until the total principal and interest reach the credit limit of equity, and the lender is either repaid in full or takes the property.


Secured creditor
A creditor, whose debt is secured. See secured debt.
Secured debt
A debt that is secured by an interest in property to which the lender may have recourse if the debt is not repaid.
Statement of affairs (SOA)
When a debtor becomes bankrupt or enters into a debt agreement or personal insolvency agreement, he or she must complete a statement of affairs that truthfully discloses all relevant details about their current financial position. This includes details of all debts, as well as details about current and recently owned assets. A debt agreement proposal, a debtor’s petition, and a Controlling Trustee authority submitted to the Official Receiver must be accompanied by a statement of affairs. Where a sequestration order is made the bankrupt must file the statement with the Official Receiver and give a copy to the trustee within 14 days of the order being made.


A trust is an obligation imposed on a person or other entity to hold property for the benefit of beneficiaries. While in legal terms a trust is a relationship not a legal entity, trusts are treated as taxpayer entities for the purposes of tax administration.
See registered trustee and Official Trustee.


Unsecured creditor
A creditor, whose debt is unsecured. See unsecured debt.
Unsecured debt
A debt that is not secured by an interest in property to which the lender may have recourse if the debt is not repaid.

Note: These F.A.Q's are for information only and should not be relied on as legal or financial advice. Your personal circumstances are not considered in any of the content above.