Glossary: A

Act of bankruptcy

An action or declaration which can be used by a creditor to apply to the court to make a person bankrupt.


An eligible person nominated by a debtor to handle a Debt Agreement on their behalf.


Australian Financial Services Authority. It’s the Commonwealth Government agency that becomes the trustee when a registered trustee is not appointed in a bankruptcy or other arrangement under the Bankruptcy Act. They are also the Government Body that regulates all personal insolvency administrations in Australia.


is effectively the cancellation of a bankruptcy which can be achieved in 3 ways:

  • The debts are paid in full, including trustees expenses and charged, government charges (realisations charge) and any applicable interest, or
  • Creditors accept a composition or arrangement pursuant to section 73 of the bankruptcy act, or
  • You can apply to the court to set aside the bankruptcy on the basis that you shouldn’t have been made bankrupt in the first place or lodged a debtor’s petition.

Antecedent Transaction

A transaction that has taken place prior to a Personal Insolvency Agreement or bankruptcy. They include transactions where:

  • Less than market price has been paid for an asset in consideration of a transfer in ownership or,
  • A transfer has been made to defeat the right of access by creditors or,
  • Preferential payments are made to a specific creditor.

A trustee has the ability to recover the asset or difference in purchase price paid.


Australian Restructuring Insolvency & Turnaround Association.


Anything a person owns before going bankrupt, or buys or receives during bankruptcy. Assets can be divided into two types – Vesting Assets and Protected (exempt) Assets.

Associated Entity

In relation to a person is an entity (other than a company) that is, or has been, associated with the person; or a company that is, or has been, associated with the person at a time when the company is, or was, as the case may be, a private company.


A process where people who cannot pay their debts become bankrupt to receive the protection from their provable unsecured creditors. Their bankrupt estate is administered by a trustee and the Bankruptcy Act allows for the fair distribution of property amongst creditors where applicable.

Bankruptcy Act 1966

The Commonwealth legislation that covers Bankruptcy, Part IX (Debt Agreements), and Part X arrangements (PIA’s).

Bankruptcy Notice

A formal, final demand for payment of a debt by a creditor who is owed at least $5,000 on one or more final judgments or final orders. The Australian Financial Security Authority (ASFA) issues this notice via the Official Receiver. Failure to pay within 21 days is an act of bankruptcy.

Bankruptcy Offence

An act by a person under the Bankruptcy Act that can lead to a person being prosecuted, fined, imprisoned, or made to make restitution.


A bankrupt may derive a benefit from a number of sources. It could be a loan, or a fringe benefit, or monies paid to a third person as a result of exertion by a bankrupt. These types of benefits can be included as a part of a bankrupt’s contribution assessment to determine what contribution must be paid from a bankrupt’s income.

Bill of Sale

A certificate of transfer of personal property, typically used when something is transferred as security for a debt.


A warning or proviso of specific stipulations, conditions or limitations. When a caveat appears on the title of real property it effectively prevents the registration of any dealings (like a transfer or a mortgage) until the caveat has been formally withdrawn.


To impose a burden, duty, obligation or lien. In other words; to create a claim against property.

Chattel Mortgage

A mortgage on a movable item of property, like a car.


A sum of money that a bankrupt person is required to regularly pay to their trustee from their income. It’s normally called a compulsory contribution and is determined by a statute-based formula.

Controlling Trustee

A person who is a registered bankruptcy trustee, AFSA trustee or 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 Magistrates Service. Both of these Courts can hear matters associated with personal insolvency.

Creditor’s Petition

A means by which a creditor makes an application to the Court to make a debtor bankrupt.

Debt Agreement

An arrangement between people who cannot pay their debts. It’s a formal arrangement under Part IX of the Bankruptcy Act.


A person who owes money to a creditor.

Debtor’s Petition

An application made to AFSA to become bankrupt.


In relation to a bankrupt person, dependant means a person who resides with the bankrupt person, is wholly or partly dependent on the bankrupt person for economic support, and derives (or is likely to derive) an income less than the prescribed threshold during the contribution assessment period.


The end of bankruptcy. The date of discharge is the day after bankruptcy ends. The statutory period of bankruptcy is 3 years and 1 day from when a person files their Statement of Affairs through the Official Receiver (AFSA).


A dividend is a distribution that’s made to creditors from any asset or income realisations in an administration under the Bankruptcy Act.


Equity is the extent of ownership of an asset by a person. In a mortgage situation, one’s equity in their home is equal to the value of the home minus the amount of money owed on the mortgage.

Examinable Affairs

In relation to a person means the person’s dealings, transactions, property and affairs, and the financial affairs of an associated entity of the person in so far as they are, or appear to be, relevant to the person or to any of his or her conduct, dealings, transactions, property and affairs.

Exempt Assets

Assets/property that cannot be sold in bankruptcy by the trustee. These are identified in Section 116 of the Bankruptcy Act.

Extension of Bankruptcy

If a bankrupt fails to co-operate with their trustee, or fails to meet the requirements of the Bankruptcy Act, their bankruptcy can be extended to a 5 or 8-year period from the date they file their Statement of Affairs with AFSA through the Official Receiver.



Formal arrangements

Are the insolvency administrations provided by the Bankruptcy Act 1966. They include Bankruptcy, Debt Agreements and Personal Insolvency Agreements.

Fringe Benefit

Is a benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986.


This is an automatic deduction from a person’s income or bank account, arranged without their consent, due to non-payment of a debt. Your creditors can seek a garnishee order from a court magistrate in order to collect the money you owe them. The ATO is able to issue garnishee notices for failure to pay tax. 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 in their bankruptcy and they fail to make payments independently.

Hire Purchase

A system whereby one pays for a thing or item in regular instalments in exchange for the use of said item or thing.

Household Property

Items that a bankrupt person is able to retain when they become a bankrupt. A list of items can be found in the Bankruptcy Regulation 6.03.

Income contribution assessment

A trustee will make an assessment of a bankrupt’s income for the period in which they are undischarged from bankruptcy. A bankrupt person’s income will typically be assessed for three (3) contribution assessment periods. The bankrupt person will be required to pay the trustee a portion of their income if their income surpasses the indexed threshold.

Indexed amounts

These are amounts that are periodically adjusted in accordance with the Consumer Price Index. Some are adjusted every quarter, others every 6 months. As an example, they identify the value of assets that can be retained by a bankrupt person or the income that a bankrupt person can retain before they are required by law to contribute towards their bankruptcy. There current indexed amounts can be found here.

Informal arrangements

Refers to agreements between a debtor and creditor that have the effect of altering pre-existing contractual arrangements. Such agreements are not administered by the Bankruptcy Act 1966. It’s recommended that informal agreements are confirmed in writing by the creditor.


A person is considered to be insolvent when they are unable to pay their debts as and when they fall due.


An amount of money accepted by a Court as being owed by a person (or entity) to another person (or entity).


A contract whereby one party conveys land, property, a vehicle or service to another party for a specified time in return for periodic payments.


A right given to another by the owner of property to secure a debt or one created by law in favour of a certain creditor or creditors.

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A legal agreement by which a lender extends credit (usually subject to interest) in exchange for taking title of the borrower’s property until such time that the debt is paid in full.

Novated Lease

A novated lease is a vehicle lease agreement between you, your employer and a finance company. Novated leases are often referred to as car salary packing or salary sacrifice as a portion of your repayments will typically come from your pre-tax salary.


National Personal Insolvency Index. It’s a computerised database of all personal insolvencies in Australia, both past and present, managed by the Australian Federal Government. It can be accessed by anyone after payment of the relevant fee.

Objection to automatic discharge

The 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’s registered on the National Personal Insolvency Index, it’s a valid objection. A trustee can lodge an objection if a bankrupt fails to cooperate or meet the requirements of the Bankruptcy Act. In this instance, a bankruptcy can be extended to a 5 or 8 year period from the date the bankrupt files their Statement of Affairs with AFSA through the Official Receiver. In certain circumstances, the period of bankruptcy does not commence until a bankrupt returns to Australia.

Official Receiver

Is a person who administers statutory functions under the Bankruptcy Act for the government/AFSA. The functions performed are different to a trustee.

Official Trustee in Bankruptcy

Is the government equivalent of a registered trustee. This role is performed by employees at AFSA.

Ordinary Resolution

A resolution passed by a majority in value of the creditors present personally, by telephone, by attorney or by proxy at a meeting of creditors who have voted on the resolution.

Part IX

Commonly known as a Debt Agreement. It’s a flexible formal agreement entered into with creditors under the Bankruptcy Act.

Part X

This is commonly known as a Personal Insolvency Agreement. It’s a flexible formal agreement entered into with creditors under the Bankruptcy Act.

Personal Insolvency Agreement (PIA)

A formal arrangement under the Bankruptcy Act between a debtor and their creditors for finalising their debts.


This arises where a bankrupt person (pre-bankruptcy) has paid one or more creditors’ money, or transferred an asset to them in priority to other creditors.

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.


Protected Monies

Monies that cannot be claimed by a trustee, such as personal compensation money paid or payable for an injury, or certain government grants.

Provable Debt

An amount that a creditor is entitled to claim for in a bankruptcy to participate in any distribution that may arise by way of a dividend.

Public Record

The database known as the National Personal Insolvency Index houses information that’s available to the public for a fee. The paper record or file maintained by AFSA on behalf of the Official Receiver is also maintained as a public record that can be searched for a fee.

Registered Trustee

A person who is registered with AFSA to be a trustee of Bankruptcies and Part X arrangements. A Registered Trustee can also administer Part IX Debt Agreements.

Related entity

In relation to a person, means any of the following:


  1. a relative of the person;


  1. a body corporate of which the person, or a relative of the person, is a director;


  1. a body corporate that’s related to the body corporate referred to in B);


  1. a director, or a relative of a director, of a body corporate referred to in (b) or (c);


  1. a beneficiary under a trust of which the person, or a relative of the person, is a trustee;


  1. a relative of such a beneficiary;


  1. a relative of the spouse, or de facto partner, of such a beneficiary;


  1. a trustee of a trust under which the person, or a relative of the person, is a beneficiary;


  1. a member of a partnership of which the person, or a relative of the person, is a member.

Released from debt

At the date of discharge, a bankrupt is released from most debts. This means the bankrupt is no longer responsible for, or has to pay, those debts. A debtor subject to a Part X agreement is also released from their debts when they meet certain conditions within their agreement with creditors.


A resolution passed by a majority in value of the creditors present personally, by telephone, by attorney or by proxy at a meeting of creditors and voting on the resolution.

Salary Sacrifice

Can enable an employee to receive some of their remuneration in the form of concessional taxed benefits, instead of taking it all as fully assessable income. The kind of benefits commonly received relate to pre-tax salary contributions paid towards a mortgage, rent, novated lease or superannuation. For the purposes of assessing the amount a bankrupt will be required by law to contribute towards their bankruptcy, salary sacrifice arrangements with an employer are taken into account.

Secured creditor

A creditor who holds a charge, mortgage, lien<pop-up definition>, lease or other type of security over specified assets until the debt is paid in full. If a debtor defaults on a secured liability, the creditor has the right to repossess and sell the assets to reduce the debt.

Sequestration Order

An order made before a Registrar of the Federal Court, a Federal Magistrate or a Judge in the Federal Court making a person bankrupt based on a Creditor’s Petition or other application as outlined under the Bankruptcy Act.

Special Resolution

A resolution passed by a majority in number and at least three-fourths in value of the creditors present personally, by telephone, by attorney or by proxy at a meeting of creditors and voting on the resolution.

Statement of Affairs

A statutory document completed by a debtor that summarises their particulars. The form is to be completed by a debtor who wishes to become bankrupt (together with a Debtor’s Petition) or upon becoming bankrupt by a sequestration order.


This is a person who administers a bankruptcy or Part X administration. It’s either a Registered Trustee in Bankruptcy or AFSA as the Official Trustee in Bankruptcy.

Undervalued Transaction

Is a transaction where less than market price has been paid for an asset in consideration of a transfer in ownership of the asset. A trustee has the ability to recover the asset or the difference in purchase price paid.

Unsecured creditor

Is a creditor who does not hold a charge over specified assets to protect their debt.


To confer or bestow power, authority and/or property on someone. When something like an asset vests in your bankruptcy trustee, your trustee basically stands in your shoes regarding ownership of the asset.


Vesting asset

Assets/property that can legally be sold in bankruptcy by the trustee.

Voidable Transactions

If a trustee investigates transactions and believes that a bankrupt has improperly transferred assets that would have otherwise been available to creditors in bankruptcy, The Bankruptcy Act has provisions in place that allow the trustee to cancel those transactions and claw the property or assets back.

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