Bankruptcy can provide relief from many unsecured debts, including credit cards, personal loans and unpaid utility accounts. However, it does not automatically remove every financial obligation.

Some debts remain payable during and after bankruptcy. Others may be included in the bankruptcy but are not released when the bankruptcy ends. Secured debts, such as mortgages and some car loans, are treated differently again.

I am Clare Corrigan, a Registered Trustee specialising in personal insolvency and bankruptcy. When I speak with people considering bankruptcy, I look carefully at the type, timing and legal nature of each debt because these factors can significantly affect the outcome.

Which Debts Are Not Covered by Bankruptcy?

Debts that may remain payable despite bankruptcy include:

• Court-imposed fines and penalties
• HECS and HELP debts
• Child support and maintenance
• Certain debts incurred through fraud
• Debts incurred after bankruptcy begins
• Certain unliquidated damages
• Some statutory penalties and proceeds-of-crime liabilities
• Certain council or local government property charges
• Certain compensation debts relating to specified child sexual abuse offences
• Secured debts where the creditor continues to enforce its security

The treatment of each debt is not identical, which is why it is important to understand more than whether a debt is simply “included” or “excluded”.

The Australian Financial Security Authority (AFSA) distinguishes between provable and non-provable debts, as well as debts that are or are not released when bankruptcy ends.

Read AFSA’s guidance on debts during bankuptcy.

What Does “Not Covered” Actually Mean?

A provable debt is generally one where the creditor can lodge a claim in your bankruptcy and potentially receive a distribution.

Most ordinary unsecured provable debts are released when bankruptcy ends.

However, some debts are provable but not extinguished. Child support and certain fraud debts are examples. This means the creditor may participate in the bankruptcy but still pursue any remaining balance later.

Other debts are non-provable and remain payable throughout and after bankruptcy.

This distinction is important because not all debts that survive bankruptcy are treated in the same way.

Court-Imposed Fines and Penalties

Court-imposed fines are generally not cleared by bankruptcy.

They usually remain payable during bankruptcy and after you are discharged.

However, not every amount commonly called a “fine” is treated exactly the same way. Traffic fines and similar liabilities can depend on the law applying in the relevant state or territory.

If fines make up a significant part of what you owe, their exact legal nature should be checked before assuming bankruptcy will deal with them.

HECS and HELP Debts

Government student debts such as HECS and HELP are not cleared by bankruptcy.

These debts remain payable after bankruptcy ends.

This matters if student debt represents a large part of your overall liabilities. Bankruptcy may still deal with qualifying credit cards, personal loans or other unsecured debts, but the HECS or HELP balance itself will remain.

Child Support and Maintenance

Child support, child maintenance and spousal maintenance are also treated differently from ordinary unsecured debts.

These debts may be provable in bankruptcy, but they are generally not released when bankruptcy ends.

This means you can remain responsible for the outstanding obligation after discharge.

Where maintenance obligations are substantial or disputed, separate family law advice may also be appropriate.

Debts Incurred Through Fraud

Bankruptcy does not normally release a person from certain debts incurred through fraud or fraudulent breach of trust.

A creditor may be able to lodge a claim in the bankruptcy and still pursue any balance remaining after discharge.

However, simply describing a debt as “fraudulent” does not automatically determine the outcome. The legal treatment depends on the circumstances surrounding the liability.

Where fraud is alleged or disputed, independent legal advice may be required.

Debts Incurred After Bankruptcy Begins

Bankruptcy generally deals with debts connected to your financial position before bankruptcy.

It is not ongoing protection against debts you take on afterwards.

If you borrow money, enter into a new contract or incur another liability after becoming bankrupt, that debt will generally remain your responsibility.

This is why budgeting and careful financial management remain important during bankruptcy.

You can learn more about the wider process in What Happens When You Declare Bankruptcy in Australia.

Certain Unliquidated Damages

Certain unliquidated damages may also fall outside bankruptcy.

An unliquidated claim is broadly one where the amount of compensation or damages has not yet been fixed.

The treatment depends on how the liability arose and whether the amount had already been determined before bankruptcy.

Because this can be a technical area, the individual facts should be reviewed carefully.

Certain Statutory and Compensation Liabilities

Some liabilities created by specific Australian laws are not removed through bankruptcy.

These can include certain proceeds-of-crime liabilities and statutory penalties.

Australian bankruptcy law was also amended in 2026 so that qualifying compensation debts owed by perpetrators of specified child sexual abuse offences are not extinguished by bankruptcy where the legislative requirements are met.

This is an important reminder that bankruptcy does not override every type of legal liability.

Are Mortgages and Car Loans Covered?

Secured debts require a different explanation.

A secured debt is linked to an asset, such as:

• A mortgage secured against a house
• A car loan secured against a vehicle
• Certain hire-purchase arrangements

Bankruptcy does not automatically remove the secured creditor’s rights over that property.

If you want to retain the asset, you will generally need to continue meeting the repayment requirements.

If the asset is sold and the sale price is not enough to repay the secured loan, the remaining shortfall may generally become an unsecured debt covered by the bankruptcy.

So the better question is often not whether the mortgage or car loan is “covered”, but what happens to the secured property and any remaining debt.

For more information about vehicles, see Can I Keep My Car If I Declare Bankruptcy?.

Are Tax Debts Cleared by Bankruptcy?

A common misconception is that tax debt always survives bankruptcy.

That is not generally correct.

Many ATO debts relating to periods before bankruptcy can be provable and may be released when bankruptcy ends.

However, timing and the nature of the tax liability matter. The ATO may also have specific rights in relation to refunds, credits or existing garnishee arrangements.

However, timing and the nature of the tax liability matter. The ATO may also have specific rights in relation to refunds, credits or existing garnishee arrangements.

What About Centrelink Debts?

Centrelink and other government benefit debts can also require individual assessment.

Their treatment may depend on the type of debt, when it arose and whether fraud was involved.

For that reason, a Centrelink debt should not be treated as automatically included or excluded without checking the circumstances.

What Happens to Joint Debts?

Your bankruptcy does not automatically release another person who is jointly liable for the same debt.

This can apply to:

• Joint personal loans
• Joint credit cards
• Joint mortgages
• Guaranteed loans

If only one borrower becomes bankrupt, the creditor may generally pursue the non-bankrupt borrower for the outstanding amount.

Likewise, if someone guaranteed your debt, your bankruptcy does not normally remove the guarantor’s liability.

This can have important consequences for spouses, partners, relatives and business associates.

Which Common Debts Are Usually Covered?

Most ordinary unsecured debts incurred before bankruptcy are treated differently.

These can include:

• Credit cards
• Store cards
• Unsecured personal loans
• Payday loans
• Overdrawn bank accounts
• Unpaid utilities
• Certain unpaid rent
• Medical fees
• Legal and accounting fees
• Many pre-bankruptcy tax debts

For a broader explanation, visit my Bankruptcy Services page.

Do I Still Need to Declare Debts That Bankruptcy Does Not Clear?

Yes.

You should disclose all debts you owe, including debts you believe will remain payable.

Your trustee needs a complete picture of your financial position to determine how each liability should be treated.

Leaving a debt out because you believe it is excluded can create unnecessary complications.

Why the Type of Debt Matters

Two people can each owe $100,000 and have very different bankruptcy outcomes.

One may owe mainly credit cards, personal loans and pre-bankruptcy tax debts.

Another may owe mostly HECS, child support, court fines and fraud-related debts.

The total is the same, but the practical benefit of bankruptcy may be very different.

That is why I consider:

• Who the debt is owed to
• Whether it is secured or unsecured
• When it arose
• Whether it is provable
• Whether it will be released
• Whether another person is jointly liable
• Whether security can be enforced
• Your assets and income
• What alternatives may be available

Is Bankruptcy Still Worth Considering If Some Debts Remain?

Possibly.

Having debts that survive bankruptcy does not automatically mean bankruptcy is unsuitable.

For example, you may have a HECS debt that remains payable but also have substantial credit card, personal loan and tax debt that can be dealt with through bankruptcy.

On the other hand, if most of what you owe falls into categories that bankruptcy will not release, the benefit may be more limited.

Depending on your circumstances, alternatives may include creditor negotiations, hardship arrangements, a debt agreement or a Personal Insolvency Agreement.

How I Can Help

Bankruptcy can provide meaningful relief in the right circumstances, but it should not be approached on the assumption that every debt will disappear.

As a Registered Trustee specialising in personal insolvency, I can help you review:

• Your complete creditor list
• Secured and unsecured debts
• Tax and government liabilities
• Joint debts and guarantees
• Business-related personal debts
• Debts that may survive bankruptcy
• Your assets and income
• Alternatives that may be available

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If you are struggling with debt or considering bankruptcy, contact Clare Corrigan to arrange a confidential discussion about your financial position and the options that may be available.