• Debt Agreements
  • Bankruptcy

Debt Agreements are sometimes put in the same basket as bankruptcy, but they differ in several important ways.


1. You don't surrender your passport

If you file for bankruptcy you are not able to travel overseas for three years without your Trustee's permission. Your ability to travel is solely at their discretion. Travel overseas for work or family emergencies are generally approved. 

2. You can have up to $238,238.00 in assets

If you own a house, shares, a business, they can all be sold under a bankruptcy.  Normal household property, superannuation, a car up to a value of $8,100, tools up to $3,800 are protected. All other assets can be sold under bankruptcy.

3. You can keep your car

Under bankruptcy, you can own a vehicle up to a value of $8,100. Cars above this value can be sold by your Trustee, and $8,100 returned to you to buy another car.

4. No permanent record

Bankruptcy is recorded forever on the National Personal Insolvency Index.   A Debt Agreement is only recorded for 5 years (longer in some circumstances but not permanently).

5. Keep your tools of the trade/business assets

If, for example, you're a tradie and had $20,000 worth of tools. The tools will be taken, sold, and $3,800 (the current threshold) returned to you. If you run a café or other small business and have equipment or assets in excess of $3,800, these assets would be sold under bankruptcy.

6. Keep inheritance and anything bought after

Any asset you buy for the three years of your bankruptcy is "after-acquired property" and will be taken by your Trustee and sold. Any assets or cash you receive during your bankruptcy will be taken or sold. For example, the Trustee will take any inheritance you receive.  If you were planning on starting up another business, this could be a problem. In a Debt Agreement, you can buy anything you want during the term of the Debt Agreement and receive your inheritance.

7. Can continue to be a company director

If you're in business with a company structure, thinking about starting a business, or you have a self-managed super fund, you are unable to continue to be the director of that Company if you file for bankruptcy. Being a company director is unaffected by a Debt Agreement.

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