If a creditor intends to enforce an unpaid debt, the creditor is entitled to present a creditor’s petition to the court to recover the money owed. If the creditor’s petition is successful, the court will make a sequestration order. The trustee in bankruptcy then takes over the bankrupt’s estate for the benefit of the creditors.

Who Can Present a Creditor’s Petition?

Creditors can be individual creditors or a group acting as joint creditors. The total amount of the unpaid debt must not be less than $5,000, which could include small creditors acting jointly.

Secured creditors cannot present a creditor’s petition, unless to the extent that the amount owed exceeds the relevant security. Alternatively, if the secured creditor surrenders its security to the trustee in bankruptcy, the secured creditor can participate in the joint creditor’s petition.

Who Can be a Debtor?

A creditor’s petition can be presented to individuals, joint debtors and partners in a partnership.

The debtor must have some connection to Australia, including the following:

  • Is personally present or ordinarily a resident in Australia; or
  • Has a dwelling house or place of business in Australia; or
  • Is carrying on business in Australia, whether personally or through an agent or manager; or
  • Member of a firm or partnership that was carrying on business in Australia.

The debt has to be owed to the creditor and must be a liquidated sum, and cannot be, for example, an unliquidated claim for damages. A creditor should obtain a court judgment against the debtor to ensure that a debtor can’t dispute the debt (although these can potentially be set aside in certain circumstances).

For a creditor to present a petition, the debtor must have committed an act of bankruptcy within the six months immediately preceding the presentation of a creditor’s petition. This shows that a debtor is insolvent.

Acts of Bankruptcy

An act of bankruptcy usually involves not complying with a bankruptcy notice, which any creditor can rely on. A bankruptcy notice is issued by the Official Receiver on application by a creditor. A copy of a sealed (or certified) judgement or order of the court must be attached to the bankruptcy notice.

Other acts of bankruptcy, which are not as common include:

  • An intent to delay or defeat creditors;
  • Execution against the debtor;
  • Signing an authority under Part X.

In order for a debtor to be considered to have an intent to delay or defeat creditors, a creditor would need to show that the debtor has carried out one of a number of potential acts including:

  • Leaving or staying out of Australia;
  • Departing from their residence or place of business;
  • Being generally absent; or
  • Staying in their residence and refuse to allow entry to process servers or others seeking to recover their debts.

Where an act of bankruptcy involves execution against the debtor, the creditor must show that the execution has been returned unsatisfied (the warrant of execution has been physically brought back to the court registry).

If a debtor attempts to come to an arrangement with creditors through a Part X personal insolvency agreement, they must sign an authority authorising a trustee or a solicitor to call a meeting of creditors. If the creditors do not accept the settlement proposal by the debtor, any of the creditors are entitled to present a petition.


If you are a creditor looking for advice regarding your entitlement to present a creditor’s petition, or if you are a debtor and require advice in respect of bankruptcy or alternative debtor arrangements, get in touch with out insolvency lawyers on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy