When you declare bankruptcy it is essential that you disclose all of your debts, no matter what sort they are. The Bankruptcy Act will then determine which of those debts you will actually be released from – they are known as “provable debts”.

Provable debts are those that you are liable for, or could possibly (contingently) become liable for, as at the date that you become bankrupt. The most straight-forward provable debts are unsecured debts such as credit cards, store cards and personal loans. “Unsecured” means that there is nothing that the bank has a claim on that could be sold if you did not make all of the payments.

This distinction is important, because the act of declaring bankruptcy does not stop a secured creditor from being able to realise their security, ie. to sell it in the event of non-payment. A debt can only be provable when it does not involve the value of a secured asset. If a secured creditor wanted to make a claim in your bankruptcy they would need to:

• sell the secured asset and claim for any shortfall from that sale; or
• claim the estimated shortfall, ie. the difference between the value of the asset and the amount of the debt; or
• release the secured asset entirely and claim the full amount of the debt.

There are some other sorts of debts that are non-provable, meaning that you have to pay them. These include Child Support, HECS and FEE-HELP and certain types of fines. To clarify which of your debts would be provable in bankruptcy, you can call the Australian Bankruptcy Service today on 1800 462 767. We have years of experience in bankruptcy advice and administration, and a Registered Trustee in Bankruptcy on site who can ensure that the information you are given is 100% accurate.