Glossary of bankruptcy terms

Bankruptcy is a complex legal procedure with many moving parts.

Below is a useful overview to assist you in understanding the key terms you will encounter in relation to bankruptcy, whether as an individual or an organisation.

Term	Explanation
Active bankruptcy	A term used to describe when an insolvent person has filed for bankruptcy and the process is still ongoing.
AFSA	Australian Financial Security Authority - the Australian government agency responsible for regulating personal insolvency.
Annulment	The process of having a bankruptcy reversed, either by paying off all debts or through the decision of the court.
Automatic discharge	The automatic release from bankruptcy after the set period, assuming all requirements have been met.
Bankruptcy	An insolvency procedure that applies to a natural person. It involves the appointment of a trustee to a bankrupt estate of the individual.
Bankrupt	An individual who has been declared or declares themselves bankrupt under Australian law.
Bankrupt estate	All assets and liabilities of the bankrupt that are administered by the trustee.
Bankruptcy notice	A legal notice issued by a creditor demanding payment of a debt, which can lead to bankruptcy if not complied with.
Creditor	An individual or entity to whom money is owed.
Creditor's petition	An application to the court made by a creditor for leave to declare someone bankrupt.
Composition	An offer made by a bankrupt person via his or her trustee to deal with his or her debts.
Debtor	An individual or entity that owes money to another party.
Debtor's petition	A process that allows a person in financial difficulty to apply for their own bankruptcy.
Discharge from bankruptcy	The process of being released from bankruptcy, typically after three years and one day after the bankrupt files a Statement of Affairs.
Dividend	A payment made to creditors from the proceeds of the bankruptcy estate.
Insolvency	A state when an individual or entity cannot pay their debts when they are due.
Personal insolvency agreement (PIA)	The second of two flexible options that allow an insolvent person to enter into an arrangement with his or her creditors.
Part IX debt agreement	A legally binding agreement between a debtor and creditors to settle debts without going into full bankruptcy.
Secured debt	Debt that is secured by collateral, such as a mortgage on a house.
Statement of affairs	A document filed by the bankrupt providing details of assets, liabilities, income, and expenses.
Unsecured debt	Debt that is not secured by collateral.
Trustee in bankruptcy	A qualified insolvency practitioner that is appointed to the individual's bankrupt estate.
Unsecured debt	Debt that is not secured by collateral.