Alternatives to bankruptcy

Last reviewed: [EDITOR: publish/review date]

Bankruptcy is rarely the only option, and for many people it isn’t the right one. If you’re facing unmanageable debt and serious financial pressure, there are several real alternatives to bankruptcy in Australia — and which one helps you avoid bankruptcy depends on your income, your assets, your debts and how much time you have before a creditor forces the decision.

This page walks through each option honestly: what it is, who it suits, who it doesn’t, and how it compares to going bankrupt. We won’t promise to “wipe” your debt. We will help you understand your choices and take the right next step. For a confidential, no-obligation conversation, call 1300 727 739.

This page sits under our broader bankruptcy advice guidance — start there for the bigger picture, then use this page to go deeper on the options themselves.

Your real alternatives to bankruptcy: the formal and informal insolvency options

In Australia, most formal alternatives to bankruptcy sit under the Bankruptcy Act 1966 [VERIFY], administered by the Australian Financial Security Authority (AFSA). The three formal personal insolvency options are temporary debt protection, a debt agreement (Part IX), and a personal insolvency agreement (Part X) [VERIFY]. Alongside these sit informal arrangements — private agreements you negotiate directly with your creditors, outside the Act.

Each is a genuine alternative, not a debt-relief scheme. They carry different consequences, and formal options are legally binding once in place. For company directors, there’s a further route the personal-debt options miss — restructuring the company debt sitting behind a personal guarantee — which we cover further down.

If you’re not sure where to start, a free financial counsellor (via the National Debt Helpline, 1800 007 007) can talk through your situation at no cost, and we can give you tailored advice on which formal insolvency options actually fit. AFSA also publishes a plain-English compare your options guide, and Moneysmart covers the basics of bankruptcy and debt agreements.

At-a-glance comparison

Here’s how the main alternatives compare against bankruptcy. Use it to narrow down what might suit you, then get advice before you commit — the detail matters, and the wrong choice can cost you.

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[VERIFY] the remaining “impact on your assets” cells against AFSA and the Bankruptcy Act 1966 before publish (asset retention per option). Part IX/Part X rows are correctly assigned (debt agreement = Part IX; PIA = Part X) — do not swap. NPII treatment resolved 2026-07-30: TDP is not on the NPII (AFSA states this explicitly); a debt agreement comes off after a set period, generally at least 5 years (AFSA ORPS8, Bankruptcy Regs ss82-83); bankruptcy and Part X stay permanently. The earlier fact-check passed “TDP: Yes” and “debt agreement: permanently” as correct — both were wrong.

Informal arrangements and negotiation

An informal arrangement is a private agreement you reach directly with your creditors — outside the Bankruptcy Act. It might mean reduced instalments, a temporary payment pause, a freeze on interest, or settling a debt for a reduced lump sum. Because informal agreements aren’t made under the Act, they don’t appear on any public register. [VERIFY]

Who it suits: people with a manageable shortfall, creditors who are willing to work with them, and enough income or a lump sum to put something realistic on the table.

The upside: it’s fast, private, kept off the National Personal Insolvency Index, and carries none of the restrictions that bankruptcy itself carries — such as the limits on overseas travel. [VERIFY] You keep control.

The catch: informal arrangements are not legally binding. [VERIFY] A creditor who agrees today can change their mind, and a determined creditor can still issue a bankruptcy notice or pursue recovery. They also don’t bind creditors who weren’t part of the deal.

Compared to bankruptcy, an informal arrangement leaves your record clean and your assets untouched — but it only works when your creditors genuinely agree and stick to it. We can advise on and help negotiate these arrangements. [EDITOR: confirm RG negotiates informal arrangements directly vs advises]

Debt agreements (Part IX)

A debt agreement is a legally binding agreement under Part IX of the Bankruptcy Act 1966 [VERIFY]. You propose to pay your creditors a sum you can actually afford — usually by instalments, sometimes as a reduced lump sum — in settlement of your unsecured debts. If enough creditors agree, it binds them all.

Debt agreements are only available to people below the indexed income, asset and debt thresholds set by AFSA [VERIFY]. Those figures change each year, so we’ll check your numbers against the current thresholds rather than a fixed amount.

Who it suits: individuals on a lower income, with modest assets and unsecured debts under the threshold, who can’t pay in full but can commit to affordable payments.

Who it doesn’t: people over the thresholds, those with mainly secured debts, or anyone with the income and assets to support a more flexible Part X proposal.

The trade-offs: a debt agreement is listed on the National Personal Insolvency Index (NPII) for at least five years, proposing one is an act of bankruptcy, and it can affect your credit for years. It is administered by a registered debt agreement administrator, the Official Trustee or a registered trustee [EDITOR: confirm whether RG acts as a registered debt agreement administrator or advises/refers — see AFSA registration gate below]. Compared to bankruptcy, debt agreements let you avoid bankruptcy itself and usually keep your assets — but they are a formal, recorded insolvency option, not a quiet fix.

Personal insolvency agreements (Part X)

A personal insolvency agreement (PIA) is a formal, legally binding proposal to your creditors under Part X of the Bankruptcy Act 1966 [VERIFY]. Unlike a debt agreement, there are no income, asset or debt thresholds — which makes Part X agreements an option when your debts are too high for Part IX.

The process works like this: you appoint a controlling trustee, who takes control of your property and reports to your creditors on your proposal. Your creditors then vote, and if the required majority agree, the proposal binds them [VERIFY]. You might offer a lump sum, instalments, the transfer of certain assets, or a combination.

Who it suits: people with assets or reliable income to contribute, and debts above the debt-agreement thresholds, who want to settle with creditors and avoid bankruptcy.

Who it doesn’t: people with nothing realistic to offer creditors (who may have no viable proposal), or those whose numbers fit the simpler, cheaper Part IX debt agreement.

The trade-offs: a PIA is recorded permanently on the NPII, signing a section 188 authority is an act of bankruptcy, and it’s more formal and involved than a debt agreement — your creditors have to vote it up by a majority in number and at least 75% in debt value of those who vote. It is administered by a registered trustee [EDITOR: confirm whether RG acts as a registered trustee for PIAs or advises/refers — see AFSA registration gate below]. A PIA also restricts you from managing a corporation until its terms are fully complied with; a Part IX debt agreement does not. Compared to bankruptcy, a Part X agreement can let you keep control of how your debts are resolved and protect assets a trustee might otherwise sell — but only if creditors accept the deal.

Temporary debt protection: buying time to decide

Temporary debt protection (TDP) is a formal 21-day protection under the Bankruptcy Act that stops unsecured creditors from taking recovery action against you while you get advice [VERIFY]. It’s not a solution in itself — it’s breathing space.

Who it suits: anyone facing immediate creditor pressure who needs time to weigh up their options properly rather than being forced into a rushed decision. It’s often the sensible first step while you work out whether an informal arrangement, a debt agreement, a PIA or bankruptcy is the right path.

The catch is in the name: it’s temporary (21 days) and it only covers unsecured creditors [VERIFY]. It’s best used deliberately — to pause the pressure, get tailored advice, and act before your options narrow. This is exactly why we tell people not to wait: the earlier you move, the more of these choices stay open.

For company directors: restructuring instead of personal bankruptcy

If you’re a company director, your personal bankruptcy risk often has nothing to do with your household budget — it traces back to the business. Personal guarantees, ATO tax debt and Director Penalty Notices can make you personally liable for company debts [VERIFY], which is why some directors end up staring down personal bankruptcy over a business that could still be saved.

The alternative most consumer-focused pages miss: fix the company debt behind the exposure. Depending on the business, that can mean Small Business Restructuring, Voluntary Administration, or an informal turnaround — restructuring or resolving the company’s position so the debt driving your personal liability is dealt with at the source. [VERIFY] In the right case, that removes the need for the director to go bankrupt personally at all.

This is where having both sides of insolvency under one roof matters. Rapsey Griffiths advises on corporate insolvency and turnaround as well as personal insolvency options [EDITOR: confirm RG corporate remit and registered-liquidator status], so we can look at your company exposure and your personal position together — not treat them as separate problems. If a personal guarantee or tax debt is what’s putting you at risk, the fix may be a corporate restructuring option rather than a personal one.

How to choose — and why acting early matters to avoid bankruptcy

The right alternative comes down to your circumstances: your income, what you own, how much you owe, whether your creditors will cooperate, and whether the debt is personal or tied to a business. A debt agreement suits one person; a Part X agreement or an informal deal suits another; a director may need the company restructured first. There’s no single “better option than bankruptcy” — there’s the one that fits you.

What doesn’t help is waiting. If you do nothing, a creditor can issue a bankruptcy notice, then a creditor’s petition, which can end in a sequestration order making you bankrupt whether you chose it or not [VERIFY]. (You can also make yourself bankrupt through a debtor’s petition — but that’s a last resort, not an alternative.) Every step that passes closes off options — temporary debt protection, a negotiated deal or a formal agreement are all easier to arrange before a creditor forces the issue. A free financial counsellor can help you understand the process, and experienced financial counsellors and insolvency practitioners can point you to the right path early.

Acting early isn’t about panic. It’s about keeping your options open while you still have them. Honest, tailored advice now is worth far more than a rushed decision later.

How Rapsey Griffiths can help

Rapsey Griffiths is a Newcastle-based insolvency and advisory firm led by two senior practitioners, Mitch Griffiths and Chad Rapsey, who work directly on the matters they take on [EDITOR: confirm partner involvement wording]. You get straight, practical advice from experienced people — not a call-centre debt-relief pitch.

We’ll talk through your full situation, explain the formal insolvency options and informal alternatives that genuinely apply, and be honest about which suit you and which don’t. Because we handle both personal and corporate insolvency, we can help individuals and exposed company directors alike.

The first conversation is confidential and no-obligation [EDITOR: confirm free/initial-consult terms]. We won’t promise to erase your debts — but we will help you understand your choices and act while you still have them.

[EDITOR: BT3 social proof — add a concrete, compliant proof point here once confirmed, e.g. number of personal-insolvency matters handled, years practising, Google-review count, or a de-identified client outcome (a director whose personal bankruptcy was avoided by restructuring the company). Do not fabricate — leave gated until RG supplies real figures.]

Call 1300 727 739 for a confidential chat, or get in touch.

General information, not personal advice. This page is general information about the alternatives to bankruptcy in Australia. It is not personal financial or legal advice, and your situation should be assessed individually before you act.

Authored and reviewed by

Mitch Griffiths — Registered Liquidator, Rapsey Griffiths [EDITOR: insert ASIC liquidator registration no.] [EDITOR: confirm AFSA registration — registered trustee in bankruptcy and/or registered debt agreement administrator status, or state "advises and refers" if not held]
Chad Rapsey — Registered Liquidator, Rapsey Griffiths [EDITOR: insert ASIC liquidator registration no.] [EDITOR: confirm AFSA registration — registered trustee in bankruptcy and/or registered debt agreement administrator status, or state "advises and refers" if not held]

Reviewed by [EDITOR: reviewing practitioner], [EDITOR: date].

Frequently asked questions

What is the alternative to bankruptcy in Australia?

There are several: an informal arrangement negotiated with your creditors, a debt agreement (Part IX), a personal insolvency agreement (Part X), and temporary debt protection to buy time while you decide. For company directors, restructuring the business debt can be the real alternative to personal bankruptcy. Which one suits you depends on your income, assets and debts. [VERIFY]

What is a better option than bankruptcy?

There’s no single better option — it depends on your circumstances. Someone on a low income with modest debts may suit a debt agreement, while a person with assets or higher debts may suit a Part X personal insolvency agreement or an informal deal. The right choice is the one that fits your situation, which is why tailored advice matters. [VERIFY]

How can I get rid of debt without bankruptcy?

You can negotiate an informal arrangement, enter a formal debt agreement or personal insolvency agreement, or — if a business is involved — restructure the company debt behind your personal guarantee. Informal agreements aren’t legally binding, so a creditor can still act, which is an important difference from the formal options. [VERIFY]

Will a debt agreement or personal insolvency agreement show on a public register?

Yes. Both a debt agreement (Part IX) and a personal insolvency agreement (Part X) are listed on the National Personal Insolvency Index (NPII), as is bankruptcy. How long they stay differs: a bankruptcy or a Part X agreement is recorded permanently, while a debt agreement is removed after a set period — generally at least five years from the date it was made. Informal arrangements sit outside the Bankruptcy Act and are not recorded on the NPII at all, and neither is temporary debt protection. Bear in mind a credit report is a separate thing from the NPII: a default, or a hardship arrangement with a credit provider, can be noted there even where nothing goes on the public register.

Can a creditor force me into bankruptcy?

Yes. An unsecured creditor can issue a bankruptcy notice and then a creditor’s petition, which can lead to a sequestration order making you bankrupt. This is why acting early matters — most alternatives are easier to arrange before a creditor takes that path. [VERIFY]

Key takeaways

Bankruptcy is rarely the only option. In Australia the main alternatives are informal arrangements, a debt agreement (Part IX), a personal insolvency agreement (Part X) and temporary debt protection — plus, for company directors, restructuring the company debt sitting behind a personal guarantee.
The right option depends on your income, assets, debts, whether creditors will cooperate, and whether the debt is personal or tied to a business. There is no single “better” option.
A debt agreement (Part IX) suits lower income and assets under the indexed thresholds; a personal insolvency agreement (Part X) has no thresholds and suits those with assets or income to contribute.
Formal options (Part IX and Part X) are legally binding and listed on the National Personal Insolvency Index — permanently for a Part X agreement, for at least five years for a debt agreement. Informal arrangements stay off the register but are not enforceable.
Acting early keeps options open. If you wait, a creditor can issue a bankruptcy notice and force the decision through a creditor’s petition and sequestration.
Rapsey Griffiths advises on both personal and corporate insolvency. Call 1300 727 739 for a confidential, no-obligation conversation.