How does bankruptcy affect my income and employment?

Becoming bankrupt doesn't normally prevent you from working, but it could have an impact on your income and employment. This page helps you to understand how it could affect you.   

One of your obligations when bankrupt is to keep your trustee informed of any changes in your income or employment. For example, if you:

  • change jobs
  • receive higher or lower income (including government assistance)
  • stop working.

For more information about how bankruptcy may affect your employment see: Bankruptcy and employment.

How much can I earn?

There is no limit to the amount of income that you can earn while you're bankrupt. There is also no limit to the amount you can save during your bankruptcy. However, if your after-tax income exceeds a set amount, you may have to make compulsory payments[?]. This amount changes with how many dependants you have.

What is a dependant?

We classify a dependant as someone who meets all of the below:

  • they live with you
  • they depend on you financially and
  • earn less than the indexed amount.

    What are contributions?

    If your trustee determines you are earning over the income set amount, they'll ask you to pay income contributions[?]. Contributions is the word we often use for compulsory payments from your income.

    Your trustee can use these contributions to help repay your debts. Your trustee will notify you how and when you need to make payments. Compulsory income payments are:

    • 50% of the amount you earn above the income threshold (set amount).
    • Paid by you to your trustee, and may go towards your creditors.
    • Calculated by your trustee to determine the amount you need to pay, if any.

    If you have any enquiries about these payments, contact your trustee.

    For more information see: Official Trustee Practice Statement OTPS1- Income contributions.

    Can I save money?

    Funds you have in your account on the date of bankruptcy can become the trustee’s. Normally, you can save during bankruptcy if you keep your savings in an ordinary savings account.

    If you place money in a term deposit account or purchase an asset, the cash has changed in nature. Therefore your trustee can claim it to help repay your debts.

    Government assistance

    Can I apply for government student loans?

    Yes. If you apply for credit over a set amount, you need to disclose that you are bankrupt. Contact Study Assist to confirm your eligibility.

    Will bankruptcy affect my family tax benefits?

    No, they don't form part of your income assessment for compulsory payments.

    Can I apply for Centrelink?

    Yes. Contact Centrelink directly to confirm your eligibility.

    Is my spouse's income affected?

    The trustee can only use your income to assess whether you need to make compulsory payments.

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