Frequently Asked Questions

Can I run my own business while bankrupt? 

Yes, you can trade as a sole trader during bankruptcy. To do this there are a few things you need to know:

You must trade in your own name

You must trade in your own name. If you do not, you are required to disclose your bankruptcy to everyone you deal with. If your name is John Smith and prior to bankruptcy you operated a mechanical repair business trading as ‘All Towns Mechanical Repairs’, once bankrupt, if you continue trading you are required to include your name into the name of the business. For example, ‘All Town Mechanical Repairs by John Smith’ or ‘John Smith’s All Towns Mechanical Repairs’ or even John Smith’s Mechanical Repairs’ the choice is yours but your name needs to be in your trading name during the period of your bankruptcy.

You are not able to operate a business that involves you owning stock

This is because the stock would vest in your bankrupt estate. You are however able to operate a business that has stock on consignment provided you notify the consignor of your bankruptcy if the value of the consigned stock exceeds $5,788.

You can operate a business during bankruptcy that has debtors

Unlike stock, you can operate a business during bankruptcy that has debtors. Also, if you operated a business prior to bankruptcy that had debtors pertaining to services provided by your business, you will not lose those debtors when you become bankrupt. Further, you can continue to collect those debtors for the benefit of your business during your term. The reason for this is that your debtors when collected, convert to income and your income is assessed to determine whether you need to pay income contributions to your estate.

There are limitations on credit and purchasing

You cannot incur credit, buy goods or undertake to supply goods or services for more than $5,788 without disclosing your bankruptcy. From our experience, this is normally not a problem as the businesses being operated do not involve transactions to a value near $5,788. Types of businesses that are commonly traded during bankruptcy are businesses that do not require inventory or stock. Examples of businesses that can trade without inventory or stock include computer repairs, educational coaching, lawn mowing, mechanical repairs, fitness trainer, bookkeeping.

You can continue using your ABN

The ABN that you were using prior to bankruptcy you will continue to use once you become bankrupt. Quick Tip: The ATO will deactivate your ABN when they are notified of your bankruptcy. To reactivate your ABN, call the ATO and ask for it to be reactivated. The ATO will reactivate your ABN for you.

If you did not operate a business prior to filing but would like to commence operating a business while you are, you can do that. You are not prevented from obtaining an ABN.

During this time, you can employ people as part of your business

During bankruptcy, you can employ people as part of your business.

Any liabilities you accumulate whilst operating your business during your term, will not be part of your bankruptcy and are required to be paid by you.

We are here to help. If you have any questions please give us a call on 1300 794 492 or email

Further Reading: We recommend our article 'What is Bankruptcy? How Does it Work?'.