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Bankruptcy + Insolvency QLD

Insolvency and bankruptcy lawyers, Brisbane and Queensland-wide

If you're owed money by a company that can't or won't pay, or you've just been served with a statutory demand or bankruptcy notice, the clock is already running. Odyssey Legal acts for creditors, debtors, directors and shareholders in bankruptcy and corporate insolvency matters across Queensland, and the right first step depends entirely on which side of the debt you're standing on.

Creditors and debtors, companies and individualsDirectors advised separately from the companyActing Queensland-wide
Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

Start with the Fast-Track Assessment

Five questions, about a minute. It tells us which side of the debt you are on, whether anything already has a deadline running against it, and whether your own position as a director needs advice separate from the company's.

Owed money, or served with something? Start here.

About you
Step 1 of 5

We will come back to you with where you actually stand and what the next step is. No obligation, and the first conversation is free.

Are you the creditor or the debtor?

Insolvency law splits cleanly into two positions, and the advice that helps one side is close to useless for the other. A creditor wants pressure and speed. A debtor wants time and, where the debt is genuinely disputed, grounds to stop the process before it does real damage.

Work out which one you are, then go straight to that section.

Explaining something on a headset call, hands open
You are the creditorRecovering from an insolvent debtor
Where you are standingMoney is owed to you, ordinary requests for payment have not worked, and you are deciding how much force to apply
What you actually wantPressure and speed, and to be ahead of the other creditors rather than behind them
The first moveWork out whether the debtor is a company or an individual. The two tracks share almost nothing beyond the word insolvency
Where it goes wrongIssuing the wrong instrument on a debt the other side genuinely disputes. It gets set aside, you pay their costs, and you have spent the time you were trying to save
Two of the Odyssey Legal team reviewing a matter at a laptop
You are the debtorDefending a demand, a notice or an application
Where you are standingSomething formal has arrived, and whatever it is, it has a deadline printed on it or implied by the section behind it
What you actually wantTime, and where the debt is genuinely disputed, grounds to stop the process before it does real damage
The first moveFind the date it was served, not the date printed on it. Every deadline in this area runs from service
Where it goes wrongWaiting. Doing nothing is not a neutral choice here, it is the choice that produces the presumption, the sequestration order or the personal claim

If you are a director, you may be on both sides at once: the company has its own position and you have yours, and they are not the same question. That is what the fourth section below is about, and it is the one most pages in this area leave out.

Recovering from an insolvent debtor

You're the creditor. A company or individual owes you money, and ordinary requests for payment haven't worked. Insolvency law gives you a set of escalating tools, each one more forceful than the last, and each one with its own timeframe.

Against a company, the standard tool is a creditor's statutory demand under section 459E of the Corporations Act 2001 (Cth). To issue one, the debt must be due and payable, undisputed, and at least the statutory minimum of $4,000. The company then has 21 days to comply, negotiate a payment arrangement, or apply to set the demand aside. If none of those things happen within the compliance period, section 459C creates a legal presumption that the company is insolvent, and you can apply to the Court to wind it up.

Against an individual, the equivalent tool is a bankruptcy notice. It follows a court judgment in your favour: you obtain judgment, apply to the Australian Financial Security Authority for a bankruptcy notice, and serve it on the debtor. If they don't pay or apply to set it aside, you can file a creditor's petition seeking a sequestration order, which makes them bankrupt and hands their assets to a trustee for distribution to creditors.

Neither path is instant, and neither is free of risk if the demand or notice is defective. A statutory demand with the wrong amount, the wrong entity, or a procedural error can be set aside on that basis alone, which wastes the time you were trying to save.

The two tracks, and which one you are on

A company and an individual are two different bodies of law with two different sets of deadlines. Check the ASIC register before you decide anything: a business name is not a company, and a demand addressed to a trading name is not a demand.

Against a companyStatutory demand, then winding up
  • Day 0Statutory demand issuedFormal demand served on the debtor company for a debt of $4,000 or more. It has to be in the prescribed form and served at the registered office as it appears on the ASIC register, which is frequently not the address the company trades from.
  • 21 days from serviceThe compliance periodThe debtor must pay, negotiate, or apply to set aside. All three are live options and the third is the one with a deadline attached to it that nobody can move, including the court. Our statutory demands page sets out the grounds and the procedure.
  • Day 22The presumption of insolvencyIf the demand is unanswered, the company is presumed insolvent under section 459C. That presumption is the point of the whole exercise: from here you no longer have to prove the company cannot pay its debts.
  • Within 3 monthsWinding up applicationThe creditor applies to the Court to wind the company up. The three months runs to the day the application is made, and the application is advertised, which is often the first the company's bank and suppliers hear of it.
  • Weeks to monthsCourt hearing and orderThe Court hears the application, and if it is granted a liquidator is appointed. How long depends on the Court list and on whether the application is contested.
Against an individualBankruptcy notice, then a creditor's petition
  • FirstYou obtain judgmentA bankruptcy notice follows a judgment rather than replacing the need for one. Section 40 of the Bankruptcy Act 1966 (Cth) sets out the acts of bankruptcy a debtor can commit, and the most common by a distance is failing to comply with a notice issued after a creditor obtains judgment.
  • ThenAFSA issues the bankruptcy noticeYou apply to the Australian Financial Security Authority, which issues the notice under section 41. You then serve it on the debtor, requiring payment of the judgment debt.
  • If ignoredYou file a creditor's petitionIf the debtor neither pays nor applies to set the notice aside, the failure to comply is itself the act of bankruptcy, and you can petition the Court under section 43 for a sequestration order. Section 44 sets the conditions a petitioning creditor has to meet.
  • The orderSequestration, and a trustee is appointedA sequestration order makes the debtor bankrupt and hands their divisible assets to a trustee, who realises them and distributes the proceeds among the creditors. You are then one of those creditors rather than the only one, which is the reason being early matters more in this area than being loud.

The instrument itself is a subject of its own. What the demand has to say, how it has to be served and the four grounds a company can use to have it set aside are on our statutory demands page, and the company's registered office is on ASIC's register. A winding up application is filed in the Supreme Court of Queensland or the Federal Court, and from that point it is a proceeding with its own timetable rather than a demand with a deadline.

Odyssey Legal
A demand may not be the right first step

If the debt hasn't reached statutory demand stage yet, a properly drafted letter of demand is often the faster and cheaper first move, and it preserves your position if you do need to escalate later. See our guide to sending a letter of demand or the full debt recovery process for the steps before insolvency action becomes necessary.

Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

The company's problem, and the director's own

A company that cannot pay its debts has one problem. Its directors have a second one, it is personal, and it is not answered by anything the company does.

Directors who continue trading while a company is insolvent can face personal liability for insolvent trading, and liquidators can pursue claims against directors, or against creditors who received unfair preference payments, once an appointment is made. These are separate and serious exposures that sit alongside the company-level process, and they're a common reason a director needs their own advice distinct from the company's.

The practical consequence is that the moment a liquidator is appointed, somebody is paid to look backwards through the company's last few years on behalf of the creditors. That is the job. A director who has only ever taken advice about the company has taken advice from someone whose client is about to be represented by that liquidator.

s 588G

Insolvent trading

The duty is to prevent the company incurring a debt while it is insolvent, or where incurring the debt is what makes it insolvent. A company is insolvent when it cannot pay its debts as and when they fall due, which is a cash-flow test rather than a balance-sheet one, and the duty bites where a director had reasonable grounds to suspect that was already true. ASIC's own guidance puts the exposure at civil penalties, compensation proceedings that are potentially unlimited and can themselves bankrupt a director, disqualification from managing a company, and criminal liability where dishonesty is involved.

s 588GA

Safe harbour

The provision exists because the alternative encouraged directors to shut viable businesses to protect themselves. It protects a director who, after starting to suspect insolvency, develops a course of action reasonably likely to lead to a better outcome for the company than an immediate administration or liquidation, for debts incurred in connection with that course. It is not a status you declare and it is not retrospective. It is built out of what you did, when you did it, and what you wrote down at the time, which is why it is worth raising before the decision rather than after it.

s 588FA, s 588FE, s 588FF

Unfair preferences and voidable transactions

A payment that put one unsecured creditor ahead of the others while the company was insolvent can be an unfair preference, and a liquidator can apply to the Court to have it undone. This one catches people twice. A director who paid a supplier to keep trading can find that payment challenged, and a creditor who was actually paid can be asked to give the money back years later. Being owed money by a company that later fails is bad; being sued for the money it did pay you is the version nobody sees coming.

Contract, not statute

Personal guarantees

The most common way a director ends up personally liable has nothing to do with the Corporations Act. It is a guarantee signed years earlier on a lease, an equipment finance agreement or a trade credit application, often on a one-page form nobody kept a copy of. Liquidation does not extinguish it. The company's debt becomes yours, enforceable against you personally, and the first step is always the same: find out what you have actually signed before you decide anything else.

See tax debt disputes

Director penalty notices

The Australian Taxation Office has its own route to a director, separate from everything above, and it runs on a 21-day clock of its own. It is a large enough subject to have its own page rather than a paragraph here, so this is the paragraph and the link is below it. If a director penalty notice is the thing on your desk, start there rather than here.

None of this is a reason to panic and it is not a reason to stop taking advice about the company. It is the reason to be clear about whose advice it is. Where the company's interests and a director's own interests come apart, and in this area they frequently do, those are two sets of instructions rather than one.The regulator's own guidance on all of this is ASIC's insolvency information for directors, the sections themselves are in the Corporations Act 2001, and both are free. Neither will tell you which of the five above is actually live for you. Where the director penalty notice is the document in front of you, start with tax debt disputes instead.

Corporate insolvency and liquidation

A company is insolvent when it cannot pay its debts as and when they fall due. Liquidation is the formal process of winding a company up, realising its assets, and distributing the proceeds to creditors in the order the law prescribes.

There are three types of liquidation in Australia, and the difference between them is who starts it and why, not what the liquidator then does.

Two of the team in discussion across a desk
CVLCreditors' voluntary liquidation
Who starts itThe company's own directors or members
The company's positionAlready insolvent, and the directors have accepted it
How it beginsBy resolution of the company, without a court application
What it is forBringing an orderly end to a company that cannot trade out, and starting the clock on the liquidator's own investigations
A laptop and papers on a desk in an office
CompulsoryCourt-ordered liquidation
Who starts itA creditor, usually, by winding up application
The company's positionPresumed insolvent, typically after an unanswered statutory demand
How it beginsBy order of the Court, which appoints the liquidator
What it is forGiving a creditor a route to a company that has ignored every earlier step
Sitting down with a client over documents and a laptop
MVLMembers' voluntary liquidation
Who starts itThe members of a SOLVENT company
The company's positionSolvent, and able to pay its debts in full
How it beginsBy resolution, supported by a declaration of solvency
What it is forClosing down a company that has finished its purpose, cleanly and deliberately. Different in character from the other two

Voluntary administration sits before all three rather than alongside them. An external administrator takes control of a financially troubled company to assess whether it is viable and to propose a plan that either saves the business or returns more to creditors than an immediate liquidation would. It is the option a director asking early still has, and the option a director asking late usually does not.

Speak to our Experts: (07) 5370 8759Start Fast-Track Assessment

Bankruptcy, and what it actually does

Bankruptcy is a formal legal process under the Bankruptcy Act 1966 (Cth) that applies to individuals unable to pay their debts. Section 40 sets out the acts of bankruptcy a debtor can commit, the most common being failure to comply with a bankruptcy notice issued after a creditor obtains judgment against them.

Once a sequestration order is made, or a debtor's own petition is accepted, a trustee is appointed to realise the bankrupt's assets and distribute the proceeds to creditors.

What it changes, and for how long

Six things, and the last one is the one people are most often wrong about.

01 / 06
  1. Duration
  2. Assets
  3. Credit
  4. Travel
  5. Work
  6. What survives
  1. Three years and one day

    How long it runs

    What that meansFrom the date the bankruptcy takes effectAnd what it costs youNon-compliance with the trustee's requirements can extend it
  2. From the date of the order

    A trustee controls the divisible assets

    What that meansHousehold items, tools of trade and a vehicle are protected to set limitsAnd what it costs youReal estate and investments can be sold to repay creditors
  3. Throughout, and after

    Credit reporting and the ability to borrow

    What that meansThe record outlasts the bankruptcy itselfAnd what it costs youIt restricts the ability to obtain credit well beyond the three years
  4. Throughout

    Overseas travel needs written permission

    What that meansFrom the trustee, in writing, before you goAnd what it costs youUnauthorised travel can bring penalties or extend the bankruptcy
  5. Depends on the profession

    Some occupations are restricted

    What that meansCheck with the industry regulator or professional associationAnd what it costs youIn some professions it affects the right to continue practising
  6. Permanently

    Certain debts are not extinguished

    What that meansCourt fines, child support and student loan debts survive itAnd what it costs youBankruptcy does not clear them regardless of how long it runs
Bankruptcy is not the only answer

Bankruptcy is not the only answer to a debt that cannot be paid. Debt agreements and personal insolvency agreements are formal alternatives, and an informal arrangement with creditors is sometimes enough on its own. Each has consequences of its own, and which one fits depends on what you earn, what you own and who you owe. The point of getting advice early is that the list of available options is longest before anything has been filed.

Why choose Odyssey Legal?

Imagine the relief of finally knowing your legal troubles are in expert hands. Whether it's recovering money owed through our Letter of Demand or pursuing your rights through legal proceedings, you'll leave our consultation with certainty about your path forward and the confidence that comes from having expert litigation lawyers protecting your interests.

Queensland Law Society
Australian Restructuring Insolvency and Turnaround Association
Sunshine Coast Business Council
Damon Laffin, Legal Practice Director at Odyssey Legal
Legal Practice Director

Damon Laffin

Master of Laws majoring in Commercial Litigation
Admitted to the Supreme Court of Queensland
Admitted to the High Court of Australia
11+Years of Queensland experience
$1M+Recovered for clients
What that means in practice
Focused Expertise. At Odyssey Legal, our expertise is focused solely on Litigation, Dispute Resolution and Business, giving our clients precise and practical solutions tailored to the situation.
Proven Track Record. We've successfully resolved countless disputes and helped safeguard countless businesses, efficiently and effectively.
Expert Experience. Our team brings over a decade of litigation experience, having handled a variety of complex disputes. This translates directly into strategic insights that only come from years in the trenches.
Peace of Mind. From the first consultation, we provide clarity, confidence, and a clear path forward, so you can focus on what matters most and leave the legal headache to us.
Fast-Track Assessment

Get the right legal partner in your corner

A statutory demand or bankruptcy notice on your desk doesn't get easier by waiting. Neither does a debtor who's ignoring your calls.

Five questions, about a minute. It tells us which side of the debt you are on, whether anything has a deadline running against it already, and whether the director's position needs separate advice from the company's.

Start Fast-Track Assessment
(07) 5370 8759

If something has already been served, call rather than filling anything in. Every deadline in this area runs from service and none of them pause while a message sits in an inbox. If you'd rather start with a document, our DIY legal templates include a letter of demand template suited to smaller or more straightforward debts.

Frequently asked questions

What is the difference between bankruptcy and insolvency in Australia?

Bankruptcy refers to a legal process where an individual is declared unable to pay their debts, while insolvency is a broader term indicating a person's or company's inability to meet financial obligations as they come due.

Insolvency can lead to bankruptcy for individuals or liquidation for companies. The two words are often used interchangeably and they are not interchangeable: one is a state of affairs, the other is a formal process that only applies to people.

How do I know if I'm insolvent?

You may be insolvent if you can't pay your debts when they're due, your liabilities exceed your assets, or you're unable to obtain financing to meet your obligations.

It's crucial to assess your financial situation and seek professional advice if you suspect insolvency. For a company director this is not only a commercial question: the duty to prevent insolvent trading under section 588G turns on whether there were reasonable grounds to suspect it, so the date you first had a reason to ask is itself relevant.

What is a liquidator's role?

The liquidator investigates the company's affairs, recovers assets, pays creditors, and ensures a fair and legal winding-up process.

The investigation is the part directors tend to underestimate. It looks backwards over the company's recent history on behalf of the creditors, and it is where insolvent trading claims and unfair preference claims come from.

Who can initiate the liquidation process?

Liquidation can be initiated by the company's directors, shareholders, or by a court order following a winding up application by a creditor.

What is voluntary administration?

Voluntary administration is a process where an external administrator takes control of a financially troubled company to assess its viability and propose a plan to save the business or maximise returns to creditors.

It is the option that depends most on timing. A company that asks early still has it; a company that asks after a winding up application is on foot usually does not.

Can creditors force me into bankruptcy?

Yes. A creditor with a judgment debt can apply to the Court to make an individual bankrupt through the bankruptcy notice and creditor's petition process, and the debt has to meet the statutory minimum.

Getting advice as soon as a bankruptcy notice is served, rather than after the response period runs out, preserves the most options. Once the period has passed, the failure to comply is itself an act of bankruptcy and the argument moves on from the debt.

What is the process for declaring bankruptcy?

The process involves submitting a Bankruptcy Form to the Australian Financial Security Authority (AFSA). Once accepted, a trustee is appointed to manage your bankruptcy.

How long does bankruptcy last in Australia?

Bankruptcy typically lasts for three years and one day from the date your bankruptcy is accepted. However, it can be extended in certain circumstances, such as non-compliance with obligations.

Some consequences outlast the bankruptcy itself. The credit reporting record and certain professional restrictions do not end on the same day the bankruptcy does.

What assets can I keep during bankruptcy?

Certain assets are protected, including household items, tools of trade up to a specific value, and a vehicle up to a certain value. However, assets like real estate or investments may be sold to repay creditors.

Can I travel overseas while bankrupt?

Travelling overseas during bankruptcy requires written permission from your trustee. Unauthorised travel can lead to penalties or an extension of the bankruptcy period.

Will bankruptcy affect my employment?

Some professions have restrictions for bankrupt individuals. It's essential to check with your industry regulator or professional association to understand any implications.

What are the consequences of declaring bankruptcy?

Declaring bankruptcy can impact your credit rating, restrict your ability to obtain credit, and may result in the loss of assets. It also imposes certain obligations, such as informing your trustee of changes in your financial circumstances.

Certain debts survive it regardless of how long it runs, including court fines, child support and student loan debts.

What is a debt agreement?

A debt agreement is a formal arrangement between you and your creditors to repay a percentage of your debts over time. It's a legally binding agreement that can provide relief from unmanageable debts.

Can I avoid bankruptcy through other means?

Yes. Alternatives include debt agreements, personal insolvency agreements, or informal arrangements with creditors. These options can help manage debts without the severe implications of bankruptcy.

What does it cost to get advice on an insolvency matter?

Odyssey Legal offers fixed-fee options and a free 15-minute initial consultation to assess your matter before any cost is incurred. The specific fee estimate depends on the complexity of your situation and is discussed transparently during that consultation.

Related information

Insolvency information for directors, ASICThe regulator's own guidance on the duty to prevent insolvent trading, safe harbour and what directors must do when a company is in trouble. It is the result at position one on this searchStatutory demandsThe instrument itself: the 21 days, the four grounds to set one aside, and what the section actually requires of a creditor who issues oneDebt recoveryThe four-rung ladder and what each rung costs, which is the comparison worth making before insolvency action becomes the answerLetter of demandThe step before all of this, and often the faster and cheaper one on a debt that has not yet reached statutory demand stageTax debt disputesThe ATO's own route to a director, including the director penalty notice and its separate 21-day clockCommercial litigationA winding-up application that is defended, or an insolvent trading claim that is contested, is litigation with its own timetable and its own costs exposureSearch ASIC's registersWhere to confirm a company's registered office, its directors and its current status before anything is servedCorporations Information Sheet 1, Federal Court of AustraliaThe court's own guide to statutory demands and winding up proceedings
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