Consequences of temporary debt protection (TDP)

It's a serious step to apply for temporary debt protection (TDP). Learn about how the consequences will impact you if you proceed.

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What happens when you enter a temporary debt protection?

If you lodge a temporary debt protection application, your 21 day protection period starts from when we accept your application.

When we accept your temporary debt protection application, your creditors are:

  • notified by us of the 21 day protection period and given a copy of your financial affairs.
  • unable to enforce recovery of unsecured debts for 21 days - this includes garnishing of wages and seizing property.
  • able to start or continue legal action but can't take enforcement action to recover the debt.
  • able to continue recovery for a secured debt e.g. house or car.

Other impacts of temporary debt protection

  • You are committing an act of bankruptcy (formally known as a Declaration of intention to lodge a Debtor’s Petition) under s54A of the Bankruptcy Act 1966. A creditor could use the fact you have lodged a TDP as the basis for an application to the court to make you bankrupt.
  • After 21 days you are not automatically bankrupt, and creditors can again resume trying to recover their debts.

If you need to appear in court and are unsure if you should attend, contact the court. For more information about legal assistance see Seek legal assistance

A financial counsellor may assist you to make an informed decision. For more information see Where to find help.

How do I apply for temporary debt protection?

If you understand the consequences of proceeding with temporary debt protection and think this is the right option for you, you can apply by lodging a temporary debt protection form. 

Case study: Mohammed

Temporary debt relief during COVID-19

Mohammed is an aspiring DJ in the Sydney CBD, who is frustrated that COVID-19 has stopped him from being able to DJ in the city’s nightclubs.

Mohammed had racked up $80,000 in credit card debt in the 6 months prior to COVID-19, buying all the latest equipment to support the regular gigs he was booking in some of Sydney’s brightest night spots. This has now all dried up since the virus took hold. Mohammed’s credit card debt is increasing everyday with interest – and the only work he can get is driving his Aunt’s taxi a couple of days a week.

While the banks have been understanding and not pursued payment for now, the simple fact is that his debts are getting higher every day without any reasonable income to be able to reduce them. A few of Mohammed’s other creditors have not been as flexible as the banks - they are telling Mohammed they need the money just as badly as he does, so they are trying to get the money by taking him to court.

Mohammed was particularly worried his state-of-the-art speakers were at risk of being repossessed. The court’s judgement would normally mean that a Sheriff would be able to seize some of his assets and sell them – with the money going toward paying off Mohammed’s debts.

Mohammed was talking about this with his passenger, Manpreet, who listened with interest as he could relate to Mohammed’s circumstances. Having recently been through it himself, Manpreet was able to suggest to Mohammed that he ring the National Debt Helpline for free financial counselling.

After speaking with a financial counsellor, Mohammed decided to apply for temporary debt protection. When the application was accepted, this stopped Mohammed’s creditors from enforcing the judgment – meaning his assets weren’t seized – for a period of 21 days, giving him time to find other work.

Important information

Temporary Debt Protection is an act of bankruptcy. It can be used as a reason for a creditor to file a petition with the courts to have the debtor made bankrupt. For more information see Temporary Debt Protection.

AFSA encourages anyone considering entering into temporary debt protection to first seek advice from a free financial counsellor by calling the National Debt Helpline on 1800 007 007.

*These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.