The aim of the bankruptcy process is to give you relief from unmanageable debts and to make the process fair for your various creditors. When you are declared bankrupt you will be released from most, if not all of your unpaid debts. There are some debts that you may need to pay in full though.

The debts that you will be released from are called “provable debts“. These include your unsecured debts such as credit cards, store cards and personal loans. If you have a secured debt that is unpaid, you will only be released from that if you surrender the asset that is attached to it. If you want to keep the asset you will have to continue paying the debt.

There are some other types of debt that you may have that you will not be released from. These include things such as child support and fines. HECS and FEE-HELP debts also need to be paid via the usual channel, which is by paying extra tax if you earn over a certain amount in the financial year.

Bankruptcy automatically releases you from your obligation to make payments toward your provable debts, and your creditors cannot demand any more money from you after bankruptcy. However, if you have a tax debt it will be treated a little differently. If you owe money to the Australian Taxation Office for tax that was paid before you went bankrupt, they cannot demand that you pay it, but they also won’t write the debt off straight away. If you are owed a tax refund at any time during your bankruptcy, they will hold onto that and put it towards the debt. It is only after you have been discharged from bankruptcy, which is usually after three years, that they will cease applying your tax refunds to your debt.

You should also note that any debts that you incur after you are declared bankrupt, you must pay for them (tax debts included).

For more information on being released from your unpaid debts, call us at the Australian Bankruptcy Service on 1800 462 767. Our consultants are highly trained and experienced, and are standing by to give you confidential and obligation-free advice.