People filing for bankruptcy will now have to pay a $120 fee to the Australian Financial Security Authority (AFSA) to do so.

The Abbott government introduced the fee in a regulation late last week, which came into effect on Tuesday. It could reap about $2 million annually from the fee, with about 20,000 people expected to become bankrupt this financial year.

Consumer advocacy groups are concerned people will be unable to afford bankruptcy, which will prevent them moving on with their lives.

''Financial counsellors see people who have literally just a gold coin in their pockets when they file for bankruptcy,'' Financial Counselling Australia executive officer Fiona Guthrie said. ''If people can't afford the fee, they will either remain trapped in debt or ask charities to pay the fee for them. All that will do is shift the cost burden to the community sector.''

Kat Lane, from the Consumer Credit Legal Centre, said that in NSW people who could not afford bankruptcy could also have their personal possessions seized by the courts to pay off their debts.