AustraliaI have a personal injury compensation payout. Is this protected if I go bankrupt?
Yes, personal injury compensation payouts are generally protected from creditors if you go bankrupt in Australia, as long as the money is kept separate and not mixed with other funds.
What the Law Says
The Bankruptcy Act 1966 protects certain types of personal injury compensation from being claimed by your trustee in bankruptcy.
Under Australian bankruptcy law, money you receive as compensation for personal injury — including pain and suffering, loss of earnings, or medical expenses — is excluded from your bankrupt estate, meaning it cannot be taken by your trustee to pay your debts.
This protection applies only if the compensation is held separately (e.g., in a dedicated bank account) and not mixed with other money. If you deposit it into a joint or general account and use it for everyday expenses, the protection may be lost.
The law also treats compensation held in trust for you — such as structured settlements or funds managed by a trustee for a minor or impaired person — as protected for up to seven years after the bankruptcy starts.
Statutory TextThe property that vests in the trustee does not include… (g) moneys paid or payable to the bankrupt under an award or settlement made in respect of personal injury to the bankrupt;
— Bankruptcy Act 1966, s. 116(2)(g) — Property not divisible among creditors
What to Do
Keep your personal injury payout in a separate, dedicated bank account — do not mix it with wages, savings, or other funds.
Do not use the money to buy assets (e.g., a car or property) that could become part of your bankrupt estate.
If the payout includes future payments (e.g., a structured settlement), confirm in writing that it’s held on trust for you — this strengthens protection for up to 7 years.
Tell your bankruptcy trustee in writing about the payout and provide evidence (e.g., settlement deed or court order) showing it’s for personal injury.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.