Bankruptcy – there is usually a way out.

December 16th 2019 

Rates of bankruptcy and personal insolvency have fallen by 15% since 2017-18, with just over 27,000 reports last year. The rate of debt agreements also fell by more than 20% over the same period. (

Despite these welcome statistics, the perception persists that rates of bankruptcy are on the rise. As does the myth that when an action to bankrupt a debtor begins, it can’t be stopped. The truth is that the bankruptcy process is necessarily quite detailed and lengthy. And there is usually a way out.

As per the below diagram shows, to get to Enforcement Proceedings which includes Bankruptcy many steps have to be taken first.

“The truth is that the bankruptcy process is necessarily quite detailed and lengthy. And there is usually a way out.”

Importantly, bankruptcy proceedings are not unstoppable. That is, it is not a one-way path once an action for bankruptcy has been made. There are ways to intervene and even halt the proceedings.

Engagement is the key
A bankruptcy process has usually begun because debtors have not engaged in the debt recovery process. That is, those owed money have not been able to get a response from the debtor to numerous letters of demand or telephone calls. This includes options for those debtors facing hardship to make arrangements for a repayment process, and avert any further action like a bankruptcy action.

Anytime the debtor makes contact to make arrangements to pay the debt, the bankruptcy process can be halted.
Another option to stop bankruptcy proceedings is through a direct approach to the court for the process to be stayed, subject to a payment arrangement being entered into. There are standard forms (known as a Notice of Motion to pay by Instalments) that can be filed with the court to support this.

Many government and non-government firms accept interventions from financial counsellors on behalf of rate payers who have either not paid or defaulted on their rates. Similarly, the intervention of an independent financial counsellor in a bankruptcy case may ensure that fair repayment arrangements are made, and the threat of bankruptcy averted. This is particularly helpful to those facing financial and personal hardship who may need extra support in managing their finances.  

There is usually a way out 
It is pleasing that the latest statistics from the Australian Financial Security Authority ( show that rates of bankruptcy, debt agreements and personal insolvency have dropped. Nonetheless, for an individual with overwhelming debts, the threat of being made bankrupt is understandably stressful. But help is available. There are processes, as well as organisations and professionals who can help.

What is important is not ignoring approaches from those acting on behalf of the person to whom debt is owed. These can be debt collection departments, professional collection agencies, lawyers and state and local government bodies. Even the Australian Tax Office.

Engaging will ensure that all options are explored. Arrangements that take in personal circumstances, like hardship, can be put in place. Importantly, financial counsellors can provide support to ensure that the threat of financial stress and even bankruptcy is avoided in future.  

These organisations are available to help:   
Financial Counselling Australia is a not for profit organisation. The website provides a search facility to an accredited financial counsellor near you and it also has contact details to a national debt helpline

Alternatively, you can source your own financial counsellor.   

AICR has contacted Salvos Financial Counselling which is happy to be a point of reference for anyone needing financial counselling. The weblink is