Fairfax Media revealed in March that Mr Waterstreet had been ordered by the District Court to pay more than $420,000 to the Tax Office in a long-running dispute over unpaid tax. Barristers are required by law to notify the NSW Bar Association within seven days of an "automatic show-cause" event, which includes bankruptcy. Mr Waterstreet must now provide a written statement explaining why he considers himself a "fit and proper person" to continue holding a practising certificate. The 28-day deadline for lodging that statement expires on Tuesday. Mr Waterstreet said on Sunday he would meet an extended deadline to file the statement in a bid to keep practising. He would accept any restrictions that might be placed on his licence but noted it would ultimately be "a decision for the Bar".

The cause of his financial status was "not a lack of attention to filing, it was financial disorder", Mr Waterstreet said. "I was ill-advised, mainly because I advised myself." Mr Waterstreet was ordered on March 7 to pay $420,456.21 and costs after the District Court found he failed to pay tax in the financial years 2012-15, and did not pay subsequent penalties issued for failure to pay on time. He applied for bankruptcy the following week. Mr Waterstreet did not appear at the court hearing and did not brief a lawyer to appear on his behalf. He sent an email 12 minutes after the hearing began and said he "meant no disrespect" but had been unable to get representation after his previous legal team ceased to act for him.

"I have been advised that I am in no position to defend this action and without prejudice withdraw further defence," the email said. "I am advised to take action under the provisions of the Bankrupcy [sic] Act and ope [sic] to do so. "I had this matter down in diary for tomorrow and as usual the shoemaker's children are worst shod. You can show this email and contents to court by way of explanation." Bankruptcy typically runs for three years and one day. Mr Waterstreet said on Sunday he had sought financial and psychological advice and hoped to "address the shortfalls and personality deficits that led to the current humbling status".