With some exceptions (see property a bankrupt can keep), a trustee can take most of a bankrupt's real estate and personal property, whether situated in Australia or elsewhere [Bankruptcy Act 1966 s 116, Bankruptcy Regulations 1996 Regs 6.03 and 6.04]. This includes the bankrupt's interest in a house (whether owned alone or jointly with someone else), cash in the bank, jewellery, stocks, shares and debentures, fixtures and fittings, gifts and legacies received under a will, crops and more. Any money owed to the bankrupt can be recovered by the trustee unless it is protected (exempt).

If a bankrupt owns, or is purchasing, a home which is in the bankrupt's name the trustee will normally sell the home and distribute any equity to the creditor. This does not apply to homes purchased with Defence Service Homes loans which are protected under the Defence Service Homes Act 1918 (Cth) and the Director will rarely give permission for the sale to take place.

When both joint owners of a home become bankrupt the same applies.

If only one joint owner becomes bankrupt the trustee ill become registered as a 'tenant in common' of the home with the non-bankrupt owner, or will lodge a caveat on the title to protect the bankrupt's interest. The registration of the trustee does not prevent the mortgagee selling the property if the mortgage payments fall into arrears. The jointly owned home may be sold in any of the following ways:

If the home was bought with, or substantially with compensation money for an injury it cannot be taken, see property a bankrupt can keep.

A bankrupt is allowed to keep vehicles used for personal transport with an aggregate net equity up to $6000 or $12 000 if the vehicle is jointly owned by two bankrupts. These amounts are indexed.

Where the equity is more the trustee will sell the vehicle. In certain circumstances the equity over $6000 (or $12 000 for jointly owned vehicles) may be sold by the trustee to a relative or friend of the bankrupt. If a vehicle is sold the first $6000 (or $12 000 for jointly owned vehicles) of the proceeds of that sale will be paid to the bankrupt enabling him or her to buy and keep a cheaper car.

Of course, if the vehicle is security for a finance contract and the bankrupt does not keep up the payments, the finance company may still seize the vehicle.

Finance companies and other lenders often secure their loans with a consumer mortgage or bill of sale (see consumer credit) over a person's goods. If the payments are in arrears when a person goes bankrupt, the credit provider can seize and sell the goods. Any money still owing to the creditor after the sale is added to the bankrupt's list of debts. Where the mortgage or bill of sale is taken over goods which are exempt under the Bankruptcy Act 1966 (Cth) (such as household furniture or a motor vehicle worth less than $6000), the exemption only stops the trustee from selling or dealing with the goods. They can still be taken by a creditor with a bill of sale or a consumer mortgage if payments are behind. This seems particularly unfair since, although the Act specifically protects the goods, a bill of sale or consumer mortgage overrides that protection. However, the goods cannot be taken by the creditor and sold simply because the debtor enters bankruptcy.

Where a consumer mortgage or bill of sale is taken over goods which are not exempt the bankrupt can keep the goods as long as the payments are made on time. If the credit provider agrees the trustee can take and sell the goods, repay the amount owing under the consumer mortgage or bill of sale and keep the balance to pay the creditors. A trustee is only likely to do this if the goods are worth more than the amount still owing. Also when the goods are finally paid for they can be seized by he trustee and sold [s 58(1)].

At any time during the bankruptcy, the trustee may take any money or other items the bankrupt receives, such as gifts, lottery winnings or money inherited. If the bankrupt does save money and buys some possessions, they may also be taken by the trustee [s 58(1)].

Some debtor, seeing the threat of bankruptcy, try to get rid of their property first by transferring it to others, often to family members. Under the 'clawback' provisions of the Bankruptcy Act 1966 a trustee can take back some property that no longer belongs to the bankrupt, such as property that was sold, or given away, with intent to defraud creditor and not for its real value. Since December 1996 trustees have greater powers to set aside certain transactions entered into up to five years before the bankruptcy. Where the transaction occurred more than two years before the bankruptcy and the debtor can show he or she was not insolvent at the time, the transaction cannot be set aside [Bankruptcy Act 1966 ss 120,121].

Where a payment was made to a creditor the Official Receiver may on behalf of the trustee issue a notice requiring repayment of the sum [s 139ZQ]. A person disobeying a notice faces up to six months gaol [s 139ZT]. A person can apply to the court to set aside a notice [s 139ZS]. Where the transaction concerns property a charge can be registered over the property [s 139ZR]. The charge has priority over any other mortgage, lien, charge, or encumbrance unless it was a genuine transaction at arms length for valuable and adequate consideration.

Exceptions to this include [s 120]:

Similarly, where a bankrupt (transferor) transfers property to another party (transferee) and the transferee then gives money (or anything else of value) in consideration of this transfer to a third party, these transactions can also be set aside [Bankruptcy Act 1966 s 121A]. The Act allows a trustee to treat the transaction as if it had occurred between the transferor and the third party directly.

All bankrupts must hand over their passports when requested by their trustee, but may ask for the return of the passport during the bankruptcy and the trustee must have a good reason for refusing the request. A bankrupt whether they are a compulsory contributor or not may not leave Australia during the bankruptcy without the trustee's written consent [Bankruptcy Act 1966 s 272]. Where the bankrupt is a compulsory contributor, the trustee may impose conditions including payment of the contribution liability [s 272(2)].

Where a bankrupt leaves Australia without the trustee's written consent or contravene any of the conditions imposed, an offence is committed and the bankruptcy may be extended for eight years commencing on the bankrupt's return to Australia and/or upon conviction face up to one year in gaol.

The property that the trustee cannot take from a bankrupt is set out in the Act [Bankruptcy Act 1966 s 116(2), Bankruptcy Regulations 1996 Regs 6.03 and 6.04]. This property includes:

In determining what household goods can be retained, the trustee must regard:

Bankrupts receiving over a certain income must pay contributions to their trustee. Income includes wages, fees, commission, and the value of fringe benefits (for example, the provision of a motor vehicle or school fees for the bankrupt's children). The contribution is half the bankrupt's income above the threshold. The threshold amount is adjusted to take into account the number of dependents, income tax and child support payments. It is adjusted twice a year in line with movements in the pension rate. If the bankrupt suffers hardship the contributions may be varied upon a written application [Bankruptcy Act 1966 s 139T].

If a bankrupt does not pay the contributions the trustee can demand payment from a person who owes money or property to the bankrupt (for example, the bankrupt's employer or bank) [s 139ZL]. A person can be gaoled for failing to comply with a demand [s 139ZO]. The trustee can also recover the amount not paid as a debt by taking action against the person in court even after they have been discharged from bankruptcy [s 139ZL(10)].

There are a number of serious offence under the Bankruptcy Act 1966 for which a bankrupt person could be prosecuted. The Act has been strengthened in recent years to ensure that there are significant penalties for bankrupts who attempt to dispose of or conceal property in an effort to defeat creditor. The time period in which such actions are viewed as criminal often precedes the commencement date of bankruptcy.

Examples of offences under the Act include:

It does not cost anything for people to declare themselves bankrupt. Similarly bankrupts discharged without making any payments towards their debts do not have to pay any fees. Where a bankrupt's trustee collects (realises) money through either the recovery or sale of assets or through contributions, fees and percentages are payable to the Trustee as follows:

In addition the Federal Court/Federal Magistrates Court filing fee is $606/288 for a person and $1453/576 for a company. These fees are to be increased annually. This fee is not payable to go bankrupt but may have to be paid if a person applies to the court for an order (for example, for a creditor's petition or for an annulment from bankruptcy).