Received a bankruptcy notice? The 21-day deadline, your options and the creditor's petition

A bankruptcy notice is an official notice issued by AFSA at a creditor's request, based on a final court judgment against you. It gives you 21 days from service to pay the debt, agree an arrangement the creditor accepts, or apply to court to set the notice aside. If you do nothing, you commit an act of bankruptcy, and a creditor owed at least $10,000 can apply to the Federal Court or the Federal Circuit and Family Court for a sequestration order making you bankrupt. Treat the notice as urgent: get advice the same week from the National Debt Helpline (1800 007 007), Legal Aid or a community legal centre. Lodging a debt agreement proposal or a debtor's intention petition can also change the timetable, but each has consequences of its own.

This guide is part of debt help mistakes to avoid. It is general information; bankruptcy notices are time-critical and you should get legal advice.

From judgment to bankruptcy: the steps

Step	What happens	Time
1. Court judgment	Creditor gets a judgment in a state or territory court	—
2. Bankruptcy notice	Creditor applies to AFSA; notice issued and served on you	Judgment debt must meet the minimum; judgment generally not more than 6 years old
3. Compliance period	You pay, arrange terms, or apply to set aside	21 days from service
4. Act of bankruptcy	Failure to comply	Day 22
5. Creditor's petition	Creditor files in court, relying on the act of bankruptcy	Within 6 months of the act of bankruptcy
6. Hearing	Court decides whether to make a sequestration order	Usually weeks later
7. Bankruptcy	If ordered, you are bankrupt from the date of the order	3 years and 1 day after statement of affairs is filed, normally

The minimum debt for a bankruptcy notice and a creditor's petition is $10,000 under current law (it was temporarily higher during 2020). Reform proposals to raise it and to allow 28 days to comply were under consultation but were not law as at October 2026; see bankruptcy reform status.

Your options within the 21 days

Pay the debt in full, including costs and interest shown.
Negotiate: offer a payment arrangement or settlement. The creditor does not have to accept. Get any agreement in writing, including that the creditor will not proceed with a petition.
Apply to set aside the notice: for example if the notice contains a significant error, the judgment is not final, you have a counter-claim or set-off equal to or more than the debt, or there are other legal defects. You must apply to court within the 21 days. This needs legal advice.
Apply to set aside the judgment: if you were not properly served or have a defence, applying to the court that gave the judgment may help; it may not stop the notice period automatically.
Lodge a debt agreement proposal: if you are eligible, lodging generally stops creditors from taking action while the proposal is considered. See debt agreement eligibility.
Lodge a debtor's intention petition: stops most enforcement for 21 days so you can consider options; it is itself an act of bankruptcy and goes on the NPII.
Apply for bankruptcy yourself: some people decide voluntary bankruptcy is better than waiting for the creditor's petition, because it is cheaper for the estate and they control the timing.

Worked example: the deadline

Illustrative example: a bankruptcy notice for a $14,200 judgment debt is personally served on Jo on Tuesday 3 November 2026. The 21 days are counted from the day after service, so the last day to comply is about Tuesday 24 November 2026. On Monday 9 November Jo contacts a community legal centre. They check the notice for errors, contact the creditor's lawyers and propose $300 a fortnight. The creditor agrees in writing to accept the plan and not to rely on the notice while Jo pays. Without that written agreement, the notice period would have kept running.

Always check the exact date of service and the deadline with a lawyer; court rules on counting days and on service methods can change the result.

At the creditor's petition hearing

The creditor must prove the debt, the act of bankruptcy and service of the petition.
You can oppose the petition, for example if you are solvent (able to pay your debts) or the debt is disputed, but you usually need evidence and to file documents before the hearing.
The court can adjourn, dismiss or make a sequestration order.
Creditor's petition costs are often added to the debt, so the amount owed grows.

If a sequestration order is made, a trustee is appointed and you must file a statement of affairs. See how bankruptcy works.

Mistakes with bankruptcy notices

Waiting for the creditor to call back before acting; the 21 days keep running.
Relying on a verbal promise from a collector to "hold off".
Paying part of the debt without a written agreement; the creditor can still proceed.
Assuming you are not insolvent because you own a house: the court looks at whether you can pay your debts as they fall due.
Moving assets after receiving the notice; trustees can recover property and the court may draw inferences.

Frequently asked questions

Can a creditor make me bankrupt over a small debt?

Not under the current minimum. A bankruptcy notice and creditor's petition need a judgment debt (or combined debts on the petition) of at least $10,000.

What if I did not know about the court judgment?

Get advice immediately. You may be able to apply to set aside the judgment if you were not properly served or have a defence, and that may support an application about the notice.

Will the bankruptcy notice show on my credit report?

A bankruptcy notice itself is not bankruptcy, but the court judgment behind it is likely to be listed for 5 years. If you become bankrupt, the bankruptcy is listed too.

Sources

Australian Financial Security Authority — bankruptcy notices and what to do if you receive one
Federal Court of Australia — creditor's petitions and setting aside notices
Federal Circuit and Family Court of Australia — bankruptcy proceedings
National Debt Helpline — free advice, 1800 007 007