Personal insolvency cases in Australia drop 54.4% in December quarter
Personal insolvency cases dropped 54.4% year-on-year in the December 2020 quarter, according to the latest personal insolvency statistics released by Australian Financial Security Authority (AFSA).
There were 2,406 personal insolvencies in the December quarter 2020. These comprised of 1,629 bankruptcies, 747 debt agreements, 27 personal insolvency agreements and 3 deceased estates. In the December quarter 2020, 97% of bankruptcies were by debtor’s petition (voluntary). The remaining bankruptcies were by sequestration order (involuntary).
There were falls in all states and territories. The number of personal insolvencies fell 19.5% compared to the September quarter 2020.
By type of personal insolvencies, bankruptcies fell by 53.0%; debtor’s petitions, a subset of bankruptcies, fell by 50.6%; sequestration orders, a subset of bankruptcies, fell by 80.2%; debt agreements fell by 58.0% and personal insolvency agreements fell by 20.6%.
In the December quarter 2020, 27.1% of personal insolvencies were business related.
This quarter, AFSA has implemented several changes to the quarterly statistics. It has implemented minor revisions due to a reporting enhancement and expanded our bankruptcy statistics to show the types of bankruptcy.
Types of Personal Insolvencies
A bankruptcy can be voluntary or involuntary depending on who initiates the process. A creditor can initiate bankruptcy proceedings against you if you owe more than $5,000.
A debt agreement is a binding agreement between a debtor and creditors where creditors agree to accept a sum of money that the debtor can afford. The repayments are based on the debtor’s capacity to pay having regard to your income and all of your household expenses.
A personal insolvency agreement (PIA) is a formal option available to help the debtor deal with unmanageable debt. A PIA is a flexible way for the debtor to come to an arrangement with creditors to settle his/her debts without being bankrupt
Also Read: Australia rolls back changes in insolvency laws triggered by Covid-19 from 1 January
