• In Australia, a bankruptcy case may be initiated in either federal court or a federal magistrates court. The rules and procedures are the same in both courts, but the most the cases are heard in federal magistrates court. A bankruptcy case is generally started by a creditor who believes that a debtor is not able to pay the debt owed.
  
  

Filing

• To open a case against a debtor in the federal magistrates court, a creditor must file a creditor's petition asking the court to declare the debtor bankrupt. The creditor will have to prove that you have committed an act of bankruptcy for the petition to succeed. Typically, the creditor is able to prove the act of bankruptcy by showing you failed to abide by the instructions in a bankruptcy notice. The bankruptcy notice is a notice telling you to pay the debt.
  
  

Hearing

• All debtors are entitled to a hearing in the federal magistrates court at the date and time indicated on the original petition. At the hearing, a federal magistrate or registrar will listen to the evidence and determine if you are the person who owes the debt, if the amount of the debt is accurate and if you are able to pay the debt. If you plan to contest the bankruptcy, you must file specific forms prior to the hearing. These forms are on the federal magistrates court website.
  
  

Consequences of a Declaration of Bankruptcy

• If the magistrate declares that you are indeed bankrupt--whether by your admission or her decision--she will enter a sequestration order. Immediately after, a trustee will be appointed to manage your financial affairs. The trustee will be responsible for overseeing your finances for three years. You will be relieved from paying most of your debt, but the trustee may take most of your assets and sell them to pay creditors. You also can't acquire assets or open any new lines of credit during the three-year period.