Personal insolvency statistics released by the Australian Financial Security Authority indicate that the number of bankruptcies and other formal personal insolvency arrangements are at their lowest levels since 2005-06.
Despite the overall national trend, in the Northern Territory and Western Australia personal insolvency rates have risen. This is likely to be a result of the impact of the downturn in the mining sector. In the Northern Territory, the number of debtors entering into bankruptcy or other formal arrangements under the Bankruptcy Act 1966 (Cth) increased 28.6% in the June 2015 quarter compared with the March 2015 quarter. In the Greater Perth region, the number of debtors entering into bankruptcy or other formal arrangements increased 12.8% and the number of debtors who entered into business related personal insolvency increased 24.7%.
However, in the Greater Sydney region, the number of debtors making insolvency appointments fell by 6.5% compared with the March 2015 quarter and the number of debtors who entered into a business related personal insolvency fell 10.3%. The highest rates of personal insolvency occurred in Wyong with 78 personal insolvencies, Campbelltown with 77 and Gosford with 62. Gosford also had the highest rate of business related personal insolvencies, with 15 instances, followed by St Marys with 8.
Similarly, in Greater Melbourne, the number of personal insolvency appointments fell 9.5% compared with the March 2015 quarter, and the number of debtors who entered a business related personal insolvency fell 13.3%.
The statistics appear to reflect the historically low interest rates, resulting in a low cost of credit, along with an increased awareness of alternatives to bankruptcy. As noted by ERA Legal Director, Thomas Russell in a recent interview for the Australian Financial Review:
“It can be expected that as advisers, debtors and other stakeholders, including credit managers, become more comfortable with debt agreements and PIAs – and the higher creditor returns they may be capable of producing – there will continue to be an increase in these forms of administration over formal bankruptcy.”
This serves as an important reminder to creditors and debtors alike to consider the alternatives to bankruptcy when faced with solvency problems.
Please contact us for further advice.
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