Senator Rod Culleton has been declared bankrupt after a hearing in the Federal Court in Perth and faces being barred from serving in the Senate.

The verdict against Senator Culleton follows legal action brought against him by creditor and former Wesfarmers boss Dick Lester to have him declared bankrupt.

Under section 44 of the constitution, a senator who is declared bankrupt or insolvent is disqualified from serving in the Senate.

However, the judge has granted a 21-day stay on the order — which means Senator Culleton is not immediately disqualified.

Senator Culleton reacted to the verdict by shouting at the judge, saying "I'm bleeding here".

"You just executed me, your Honour, before I bleed to death," he said.

"I'm going to call this matter to the Senate."

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Speaking outside court, Senator Culleton said he was "not bankrupt at the moment".

"I am just in a legal rip. I will just float on my own for a while and swim to the side," he said.

"Twenty-one days it's been stayed. I will just go and set the primary order — the purported order — aside at the Supreme Court."

Senator Culleton said he was not being given a "fair go".

"I will consider my position. We have still got legal avenues. We can appeal ... I can still stand as a senator and I will fight it to the end," he said.

"This is my livelihood, not only for me, but for my children."

Senator Culleton was elected in the July federal election while representing Pauline Hanson's One Nation but he resigned from the party on Sunday.

Sorry, this video has expired Pauline Hanson says while she feels sorry for Rod Culleton she is also relieved.

Today Senator Hanson said she felt sorry for Senator Culleton — but she was happy with the court's decision.

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"Am I disappointed with the decision? No, I'm not. I've got to be honest with the public about this — if they could understand what I and the other Senators and our staff have been through dealing with Rod and his office — it's been bedlam," she said.

She urged him to step down with dignity.

"It's a relief off my shoulders, it really is. I feel so sorry for Rod and his family having to go through this but I have to say, but looking at the party and what I want to achieve, it's a relief to me," Senator Hanson said.

Senator Culleton is also facing a separate case in the High Court, with the Government arguing that a quashed larceny conviction should have disqualified him from standing in the first place.

If today's judgement is the sole one against him then One Nation will get to decide his replacement.

Rod Culleton is yet to be disqualified from serving as a senator because of the stay placed on the order. ( ABC News: Ross Nerdal )

But the Senate is likely to wait until the High Court makes a decision about whether he was validly elected before deciding how it will deal with today's bankruptcy case.

If the High Court decides he was not validly elected then Senator Culleton's brother-in-law — who was second on the One Nation ticket in Western Australia during the election — would probably take his Senate seat.

Senator Culleton said he would continue to fight to stay in Parliament.

"I won't panic. I have been in these positions before and come out of it. I mean, I'm not panicking," he said.

"I have already got the appeal prepared. I am already prepared."