The Incidence and Causes of Personal Bankruptcy in Australia

This paper examines recent trends in Australian personal bankruptcy by analysing a large data set obtained from the regulator, the Australian Financial Security Authority. It demonstrates a marked decline in Australian bankruptcy rates, since a peak in 2009, and a consistent rise in levels of unsecured debt among bankrupts. It identifies a number of distinct cohorts within the bankrupt population, and important differences between men and women, younger and older people, and professional and blue collar workers. We find that the debts of bankrupt individuals tend to fall into two distinct categories: a combination of taxation debts and legal liabilities; or a mixture of personal loan, overdraft and credit card debts, often linked to consumer spending. These findings represent a significant contribution to Australian empirical bankruptcy research. They are also timely, in light of the Commonwealth Government's recent proposals to implement significant changes to Australian bankruptcy law