Besieged senator Rod Culleton has been declared bankrupt in a Federal Court hearing in Perth, jeopardising his position in the Senate.
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The decision is the result of legal action brought against Senator Culleton by a creditor, former Wesfarmers director Peter Lester, seeking $280,000.
The constitution prohibits federal parliamentarians from being bankrupt. The judge has granted a 21-day stay on the order.
Senator Culleton recently quit One Nation after weeks of public tension over policy differences and the party's support for an unrelated legal action against him - concerning his eligibility to run at the July election - in the High Court.
If he is thrown out of the Senate as a result of Friday's bankruptcy decision, his former party will be empowered to select his replacement.
The courtroom reportedly became dramatic following Judge Michael Barker's ruling, with Senator Culleton yelling at the judge: "You've just executed me".
Outside the court, he said the stay on the bankruptcy order meant he "was in a legal rip" that he would swim out of by seeking to overturn it in the Supreme Court.
He also claimed the court proceedings were not fair because two people - against whom his wife Ioanna allegedly has violence restraining orders - were present in the courtroom at one point before they were removed by police.
"I'll fight to the end," he said.
The separate High Court decision Senator Culleton is awaiting concerns the larceny charge hanging over his head at the time of the election.
If he is declared ineligible by that jurisdiction, an automatic recount would most likely award his spot to the person who was second on One Nation's Senate ticket: his brother-in-law, Peter Georgiou.
Senator Culleton's former leader, Senator Pauline Hanson said she feels sorry for him "but this was the right ruling".
"I hope he now acts honourably & steps down with dignity," she tweeted.
Senator Hanson has sought to avoid Mr Georgiou emerging as the replacement, suggesting earlier this week that he might not be able to take the job.
"I'm also hearing that his brother may be a guarantor for him in that bankruptcy. So if that be the case, his brother-in-law may not be eligible to stand. So if that be the case, then the seat comes back to the party," she said.
Senator Culleton's chief of staff, Margaret Menzel, rejected this claim.
I feel sorry for Rod Culleton & his family but this was the right ruling. I hope he now acts honourably & steps down with dignity #auspol— Pauline Hanson (@PaulineHansonOz) December 23, 2016
