What happens to my assets during bankruptcy?

Learn asset implications in bankruptcy, protect your wealth, and get expert guidance from our professionals at Victor Legal.

By John Christian – May 31, 2023
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In the 2021-2022 financial year, more than 1600 Queenslanders declared bankruptcy. Though this figure was likely inflated due to the impacts of COVID-19 on both Brisbane and regional Queensland areas, the number of new debtors in the Greater Brisbane area remained relatively high in the December 2022 quarter. If you’re facing financial difficulties, you may have considered bankruptcy as a potential solution. One of the biggest concerns for many people when considering bankruptcy is what will happen to their assets. In this article, we’ll explore exactly what happens to different types of assets during bankruptcy and offer some tips on how to protect them as well as how our bankruptcy lawyers in Brisbane can help.

Firstly, it’s important to understand what bankruptcy is. Bankruptcy is the legal process where an outside party (called a bankruptcy trustee) is appointed to facilitate the distribution of the bankrupt person’s assets to the creditors that they owe money to. In most cases, people choose bankruptcy to protect themselves from being pursued by creditors they owe money to. Apart from a small number of exceptions, most people will be entirely relieved of their debts upon their discharge from bankruptcy. 

A bankrupt’s assets include property that is described under the Bankruptcy Act as ‘divisible’. What does this mean? Divisible property is property that can be divided among creditors. If you declare bankruptcy, the trustee will control all of your divisible assets and sell them to pay off your debts.  This includes all property owned at the time of bankruptcy and all property received after the date of bankruptcy until the date of discharge. This latter property is called ‘after-acquired property’. 

When the bankruptcy trustee sells off assets to pay the creditors, there are often contested issues about what property is reasonably divisible. Will they take my house? Will they sell the boat? What about my clothes? Let’s take a look at each type of asset and how it’s affected by bankruptcy:

Real Property

Real property refers to land and any buildings or structures on that land. Your home is not a protected asset under the Bankruptcy Act. Many homes are subject to a mortgage, and even if the mortgage payments are up to date, declaring bankruptcy may be considered a default against the terms and conditions of the mortgage. While a mortgagee has the right to sell a bankrupt’s home, we find that, in most cases, they will leave this to the bankruptcy trustee.

What does this mean for the bankrupt? If there is equity in the property after paying out any proper mortgage and selling costs (i.e. real estate agent and solicitor), the bankruptcy trustee is obliged to sell the property.

Personal Property

Bankruptcy allows you to keep most ordinary household items of reasonable value, such as your furniture, television, computer, kitchen appliances, and clothing. However, if your assets exceed a certain value, the trustee may sell some of your personal property to pay off your debts. It’s best to consult a local Brisbane bankruptcy lawyer to get clear advice. 


If you own a vehicle, it will be treated similarly to personal property. You can usually keep a car that is reasonably necessary for transport, but only if it is worth up to a certain amount. The threshold is currently $8550. If your car is worth more than $8550, the trustee may sell it to pay off your debts. If there is still a loan outstanding on the car, the amount that counts towards the $8550 limit is its total value minus what you still owe.

Retirement Accounts

Retirement accounts, such as superannuation, are generally protected in bankruptcy if you receive the payments during or after bankruptcy. This means that the trustee cannot take these assets to pay off your debts. However, it’s important to note that this only applies to certain types of retirement accounts, so it’s always best to check with a trusted Brisbane bankruptcy lawyer. The flip side is that superannuation payments you received before bankruptcy are claimable by your trustee, and importantly, your trustee can claim assets you purchase with those funds—yes, including a house.


Investments such as stocks and shares will typically be sold by the trustee to pay off your debts. This also applies to restricted shares and shares in your employer’s business or a private company.  However, some investments may be exempt from being sold, depending on the type of investment and its value. Victor Legal are experts in advising on all matters surrounding investments and bankruptcy, so contact us to find out more information about your situation. 

To summarise:  What can’t the trustee take?

  • Household furniture and appliances
  • Tools needed for work (up to $3,800.00)
  • A car worth less than $8,550
  • Clothing and personal belongings (note – this is unlikely to include luxury brand items)
  • Superannuation, if you’re not yet retired (subject to certain limitations)
  • Life assurance or endowment policies (subject to certain limitations)
  • Certain damages and compensation payments
  • Sentimental property (as defined in the Bankruptcy Act)
  • Superannuation payments (subject to certain limitations)

Now that you understand the different types of assets and how they are affected by bankruptcy, it’s important to know how to protect your assets in the event of bankruptcy. Here are some tips to consider:

Seek Legal Advice

If you’re considering bankruptcy, the most important step you can take is to seek bankruptcy legal advice. A bankruptcy lawyer can help you understand the process and how it will affect your assets. We can also help you determine the best course of action to protect your assets.

Consider Bankruptcy Alternatives

Bankruptcy should always be a last resort. There may be other alternatives to bankruptcy that can help you get out of debt without losing your assets. For example, debt consolidation or a debt agreement may be a better option for you. Again, a bankruptcy lawyer will be able to advise you on the best path forwards under your exact circumstances. 

Plan Ahead

If you know that bankruptcy may be a possibility in the future, it’s important to plan ahead. You could consider transferring assets to a spouse or family member to protect them; however, it’s important to note that transferring assets to avoid bankruptcy is illegal, so it’s best to seek bankruptcy legal advice before doing so.

If bankruptcy is unavoidable and you’ve decided (or have been advised by your bankruptcy lawyer) that it is the best course forward, there are a number of considerations to be made. First, it’s important to keep good records of everything you own and owe. This can help you figure out what might be affected by bankruptcy and what might not. Second, it’s a good idea to consult a bankruptcy lawyer (if you haven’t already) if you think you might need to go bankrupt. They can help you understand the process and how it might affect your assets. Finally, if you have valuable things that might be sold to pay your debts, you might want to think about selling them before you go bankrupt. This can help you keep the money from the sale instead of losing the items altogether.

It’s important to remember that going bankrupt can be a difficult and stressful experience, but it’s not the end of the world. You can recover from bankruptcy and start fresh, even if you lose some of your assets along the way. At Victor Legal, we understand that dealing with bankruptcy can be overwhelming, and that’s why we’re here to help. Our experienced team of bankruptcy lawyers are located in Brisbane, and we’re dedicated to providing personalised and compassionate legal services to help you navigate the complex process of bankruptcy. If you’re facing financial difficulties and need guidance to protect your assets, contact us today to schedule a consultation. Let us help you get back on track and secure your financial future.

Article by John Christian, Principal Lawyer, Founder and Director of Victor Legal

John has extensive experience in complex civil and commercial dispute resolution and litigation matters, specialising in:

Building and construction disputes
Complex litigation
Contract drafting and review
Dispute Resolution
Commercial Law
Corporate insolvency
Securities and caveats
Debt collection
Contract disputes
Commercial and risk mitigation advice

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