Number of financially distressed individuals turbo-boosted by high interest rates, tax debt and cost-of-living pressures
Personal insolvencies across Australia increased in the March quarter of 2024 compared to the same period in 2023, according to new data released by the Australian Financial Security Authority (AFSA).
The statistics show there were 2,981 new personal insolvencies in the three months to March 2024, up from 2,494 in March 2023. These included 1,814 bankruptcies, 1,135 debt agreements, 30 personal insolvency agreements, and two insolvent deceased estates.
In the March quarter of 2024, just over a quarter (758) of the personal insolvencies were business-related.
AFSA’s latest figures reveal that new personal insolvencies were highest in New South Wales (885), followed by Queensland (759), Victoria (579), and Western Australia (239). Personal insolvencies declined in Tasmania (53) and remained unchanged in South Australia (174).
Insolvency and business turnaround specialist Jirsch Sutherland noted that the rise in personal insolvencies coincides with ongoing cost-of-living pressures and business failures.
Malcolm Howell (pictured), a partner with Jirsch Sutherland, explained that corporate insolvencies often lead to a spike in personal insolvencies as creditors seek repayment.
“It’s almost a guaranteed cycle: following a period of business failures, there’s often a spike in personal (or consumer) insolvencies months down the track as creditors ‘call in their markers’,” Howell said. “But there’s also a lot of non-business-related causes, and in the current economic environment, the number of financially distressed individuals has been ‘turbo-boosted’ by high interest rates, tax debt and cost-of-living pressures.
“It’s interesting to note a significant increase in the number of debt agreements during the quarter. Debt agreements, also known as Part IX agreements, are a formal way of settling most debts without going bankrupt.
“However, it must be remembered that they don’t release you from all debts and can affect your ability to obtain future credit. That’s why it’s important to speak with a registered bankruptcy trustee to provide you with the best possible guidance.”
Australians experiencing financial difficulties are encouraged to seek help early from trusted sources to find a solution suitable for their circumstances. Financial counsellors and registered insolvency professionals can help review individual situations and plan an appropriate response.
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