Bankrupt is a person (as opposed to a company) who is declared at law to be unable to pay their debts. Pursuant to section 5 of the Bankruptcy Act 1966 (Cth) a bankrupt means:

  • A person whose estate a sequestration order has been made; or
  • Who has become a bankrupt by virtue of the presentation of a debtor’s petition


Creditor’s petition

A sequestration order results from what is known as a “creditor’s petition” whereby a person or entity to whom money is owed applies to the court to make a person bankrupt. In order for a creditor to make a person bankrupt three conditions must be met:

  • An amount of $5,000 or more is owed (or $5,000 collectively by two or more petitioning creditors);
  • The amount is a liquidated sum; and
  • An “act of bankruptcy” has been committed by the debtor within the 6 month period before the petition is presented to the court


The Court (either the Federal Court or Federal Circuit Court) has jurisdiction to make a sequestration order, pursuant to section 43 of the Bankruptcy Act 1966 (Cth), if a debtor has committed an “act of bankruptcy” and at the time it was committed they:

  • were resent or ordinarily a resident in Australia;
  • had a dwelling-house or place of business in Australia;
  • carried on a business in Australia (either personally or through agent); or
  • were a member of a partnership carrying on business in Australia.

Debtor’s petition

Pursuant to section 55 of the Bankruptcy Act 1966 (Cth), a person who owed money to a creditor may present a petition against himself or herself to the Official Receiver. The debtor must fall within the jurisdiction outlined above (debtor’s petition equivalent is section 552A of the Bankruptcy Act 1966 (Cth) and present the petition in accordance with the approved form and a statement of affairs. The Official Receiver will then either accept or reject the petiti
the presentation of a debtor’s petition”.