Facing bankruptcy or serious financial difficulty can be daunting, particularly for company directors who may be uncertain about their responsibilities and risks. At de Jonge Read, we specialise in supporting business owners and directors across Australia who need clear, practical guidance during times of financial distress.
This page explains how bankruptcy works, the personal liabilities company directors may face, and how to take steps to protect yourself and your business before it’s too late.
Understanding Bankruptcy in Australia
Bankruptcy is a legal status that applies to individuals who are unable to repay their debts. It provides relief from most debts, but also comes with restrictions on your finances and business activities.
Key features of bankruptcy:
- Usually lasts for three years and one day
- Most unsecured debts are wiped at the end of the period
- You may need to make compulsory contributions based on your income
- Your name is listed on the National Personal Insolvency Index
Bankruptcy is a serious decision and should only be considered after exploring all other options. de Jonge Read can help you understand your eligibility and the long-term implications.
What Happens If You Go Bankrupt?
If you’re declared bankrupt:
- A trustee is appointed to manage your financial affairs
- Certain assets, like property or shares, may be sold to pay creditors
- You may be required to surrender your passport and seek approval to travel
- You cannot be a director of a company during your bankruptcy period
Bankruptcy can offer relief but should be approached with full knowledge of the consequences.
How Long Does Bankruptcy Last?
In most cases, bankruptcy lasts for three years and one day from the date your statement of affairs is accepted. However, this period can be extended in certain circumstances, such as if you fail to cooperate with your trustee or breach other obligations.
de Jonge Read helps you understand the full process and stay compliant during the bankruptcy period.
Not necessarily. Some personal items and essential household goods are protected, and there are thresholds on income and vehicle values. However, you may be required to surrender high-value assets and any property that can be sold to repay creditors.
We help you understand what you’re entitled to keep and plan accordingly.
As a company director, you have legal responsibilities to act in the best interest of your company. If your business becomes insolvent and you continue to trade or take on new debt, you could be held personally liable for those debts. It’s crucial to act early and seek professional advice to avoid personal liability and the risks associated with trading while insolvent. Addressing financial issues before they escalate can help protect you and your business.
Common triggers for personal liability:
- Trading while insolvent
- Failing to pay PAYG withholding tax or superannuation
- Ignoring ATO Director Penalty Notices (DPNs)
Directors can be held personally liable for unpaid PAYG withholding tax and superannuation contributions, even in the absence of a formal ATO DPN. It is critical to be aware of these obligations, as failure to comply can result in significant personal financial risk. A DPN can make directors personally liable for unpaid tax debts, and in some cases, directors can face penalties or disqualification if they continue to trade while insolvent or ignore these tax responsibilities.
Early advice from de Jonge Read can help reduce your risk, guide you through legal requirements, and ensure you act within the law.
Liquidators are professionals appointed to wind up an insolvent company. They are paid from the saleproceeds of the company’s assets. If there aren’t sufficient funds, directors or creditors may agree to cover costs through a contribution or guarantee but are not compelled to do so.
We help you understand the costs and obligations involved.
If you are considering voluntary liquidation, you will need to engage a registered liquidator. de Jonge Read maintains a referral network of ASIC-registered professionals who can handle your case with integrity and care.
We connect you with reputable experts and stay involved throughout the process.
Whether you’re dealing with mounting debts, legal action, or uncertainty about your role as a director, timely action can make all the difference. de Jonge Read works with clients to:
- Review personal and company liabilities
- Evaluate alternatives to bankruptcy
- Comply with legal obligations as a director
- Plan for recovery and rebuild post-crisis
Our aim is to help you emerge from financial distress with clarity and confidence.
Worried about your financial future or director liabilities from bankruptcy? Speak with de Jonge Read for expert, confidential guidance.
Frequently Asked Questions
What Happens If I Go Bankrupt?
A trustee manages your finances, and some of your assets may be sold. You’ll face travel and business restrictions during bankruptcy but gain relief from most debts at the end.
How Long Does Bankruptcy Last For?
Bankruptcy typically lasts three years and one day, although this can be extended if you breach obligations or fail to cooperate with your trustee.
Do I Lose Everything If I Go Bankrupt?
Not everything. Basic personal items, household goods, and tools of trade up to a certain value are protected. High-value assets may be sold to pay creditors.
Are Directors Personally Liable for Company Debts?
Directors may be personally liable if they trade while insolvent or ignore legal responsibilities. Penalties can include personal repayment of debts and disqualification.
List of Registered Liquidators
ASIC maintains a list of registered liquidators in Australia. de Jonge Read can recommend trusted professionals for voluntary liquidations or insolvency advice.
How Do Liquidators Get Paid?
Liquidators are usually paid from company assets. If funds are insufficient, directors or creditors may be asked to contribute or cover certain costs. This is a voluntary contribution, but it is not a legal obligation.