Former national secretary of the Health Services Union (HSU) Kathy Jackson has declared bankruptcy as she faces a $2.5-million lawsuit for allegedly misappropriating union funds.

The HSU is suing Ms Jackson after accusing her of misappropriating more than $1.3 million of its funds.

The case, being heard in the Federal Court, centres on allegations she misused her union credit card to buy clothes and pay for meals and holidays, racking up hundreds of thousands of dollars worth of expenses.

Ms Jackson's lawyer previously told the court the expenditures were authorised but the union lost or destroyed the evidence.

Federal Court Judge Richard Tracey today asked the union what might be achieved by pursuing Ms Jackson now she had declared bankruptcy.

Mark Irving SC, counsel for the HSU, response was Ms Jackson had $278,000 in equity two weeks ago and asked to see the documentation to support the bankruptcy claim.

He said the union was now seeking $2.5 million from Ms Jackson, including costs and interest.

Ms Jackson was due to face the court today by video link from Sydney but did not appear.

The trial was previously delayed due to concerns over Ms Jackson's mental health.

Last week, she applied to have the case thrown out on the grounds she was being targeted and attacked by senior Labor figures as payback for blowing the whistle on former federal MP Craig Thomson.

The trial was adjourned until Friday to allow for the trustee overseeing her bankruptcy to seek legal advice.

Jackson's partner 'subjected to malicious attacks'

The Federal Court released affidavits from Ms Jackson and her partner Michael Lawler.

In her affidavit, dated June 22, 2015, Ms Jackson declared her net assets were $278,683.

It claimed her assets were her Wombarra property (valued at $1.3 million), a 2005 model Mercedes (valued at $15,000), bank accounts containing less than $2,000 and an engagement ring worth $20,000.

Ms Jackson wrote that she agreed to sell her share of the house to Mr Lawler to fund her ongoing legal fees, but that the sale was frozen by the court.

Her partner Mr Lawler is a Fair Work Commissioner and in his affidavit, dated June 24, 2015, stated he was "acutely embarrassed" by the current proceedings.

"Since September 2011, Ms Jackson's enemies have been astute to seek to involve me publicly in relation to affairs affecting her, at every available opportunity," he said.

"I have been the subjected (sic) of a concerted campaign of malicious attacks in the pages of The Australian.

"I say that each of the serious imputations of wrongdoing in that series of articles is false."

Jackson 'spent time in mental health unit'

Mr Lawler wrote that both he and Ms Jackson spent time as in patients in mental health units, due to the "enormous and sustained personal stress".

He also stated he was the subject of attacks from within the Fair Work Tribunal.

"I am not going anywhere. I occupy an office that I intend to continue, having devoted more than a decade of service," Mr Lawler said.

In her affidavit, Ms Jackson also wrote that a fire at her Wombarra home in January this year was deliberately lit and that police did not investigate it.

"The NSW Police did not interview or take statements from any of the occupants ... or the other relevant witnesses," she said.

She wrote that there were similarities between the fire at her home, and a fire at another union figure's house.

"A fire was set against the side of her house in the early hours of the morning and only fortuitously discovered by her son who happened to leave the house before the fire could take hold," Ms Jackson said.