The airline was more than Aus$5 billion ($3.2 billion) in debt and had appealed for a Aus$1.4 billion loan to stay afloat, but the government refused to bail out the majority foreign-owned company.
Ratings agency Moody's said unsecured creditors would have to take "a significant haircut" if the restructure was successful.
The airline had already made 1,000 workers redundant and stood down 8,000 of its 10,000 pilots, flight attendants and ground crew.
Richard Branson, the billionaire founder of Virgin Group, which owns 10-percent of the airline, tweeted a message in support of the Virgin Australia team. "I am so proud of you and everything we have achieved together," he said. "This is not the end of Virgin Australia, but I believe a new beginning. I promise we will work day and night to turn this into reality."