Keep and Pay in Australia: Bankruptcy Solutions for 2025

‘Keep and pay’ is a phrase gaining traction among Australians facing financial distress in 2025. With consumer insolvencies on the rise and household budgets stretched, understanding how to retain essential assets—like your car or home—through bankruptcy has never been more important. The ‘keep and pay’ approach offers a lifeline, but it’s not as simple as just signing a payment plan. Here’s how it works, the latest regulatory shifts, and what it means for your financial future.

Understanding ‘Keep and Pay’ in 2025: The Basics

Traditionally, bankruptcy in Australia meant surrendering non-exempt assets to a trustee, who would then sell them to repay creditors. However, the ‘keep and pay’ principle allows bankrupt individuals to retain certain secured assets—as long as they continue making payments on them.

• Secured loans: Most commonly applies to cars under finance or mortgaged homes.

• Asset retention: You keep the asset if you keep up with repayments, and the lender agrees.

• Bankruptcy trustee role: Trustees may allow retention if the asset’s equity is low or protected by exemptions.

For example, if you have a car on a secured loan and it falls under the Bankruptcy Act’s exemption threshold (currently $9,100 for vehicles in 2025), you may keep it by maintaining payments. If the equity is above this threshold, trustees may still let you retain the car if you pay the excess or if repossession isn’t in creditors’ best interests.

What’s Changed in 2025? Policy Updates and Real-World Impacts

Several key regulatory updates have impacted ‘keep and pay’ arrangements in 2025:

• Increased exemption thresholds: The government has indexed the vehicle exemption to $9,100 and household goods to $4,000, reflecting inflation and the rising cost of living.

• Digital asset inclusion: For the first time, certain digital assets (e.g., phones or laptops essential for work) may also be protected, giving more Australians the ability to maintain their livelihoods while bankrupt.

• Streamlined lender consent: Major lenders now have a standardised process for allowing bankrupt clients to retain assets, as long as repayments are maintained and insurance is up to date.

These changes mean more flexibility for individuals to manage their bankruptcy without losing the essential tools of daily life.

Practical Scenarios: When ‘Keep and Pay’ Works—and When It Doesn’t

Let’s look at how ‘keep and pay’ plays out in real Australian households:

• Keeping your car: Priya filed for bankruptcy after losing her job. Her car, worth $8,000, was her only transport to a new workplace. Under the new 2025 threshold, her trustee allowed her to keep the car as long as she maintained repayments and provided evidence of comprehensive insurance.

• Retaining a home: Joe and Lisa had a mortgage with little equity in their home. Their lender agreed to continue the loan as long as payments didn’t lapse. Their trustee determined selling the house would not benefit creditors, so they stayed put.

• Where ‘keep and pay’ falls short: If you default on payments or the lender refuses consent (for example, due to prior arrears or insufficient insurance), you risk repossession. High-equity assets are also more likely to be sold by the trustee.

In all scenarios, open communication with your lender and trustee is crucial. Documenting your ability to meet repayments and keep assets insured can tip the balance in your favour.

Is ‘Keep and Pay’ Right for You? Key Considerations

Before pursuing a ‘keep and pay’ arrangement, weigh these factors:

• Affordability: Can you genuinely maintain repayments over the long term?

• Lender cooperation: Is your lender willing to work with you post-bankruptcy?

• Trustee assessment: Will the trustee view asset retention as fair to creditors?

• Asset importance: Is the asset essential for work, health, or family life?

For many, ‘keep and pay’ is a practical route to stability after bankruptcy, but it’s not risk-free. If circumstances change, or if you fall behind on payments, assets may still be repossessed.

The Bottom Line

‘Keep and pay’ is more than a loophole—it’s a valuable tool for Australians navigating bankruptcy in 2025. By understanding the rules, recent policy updates, and your own financial limits, you can make informed choices and protect what matters most. Always review your options carefully and keep communication lines open with lenders and trustees for the best chance of a fresh start.