Based on the statistical figures provided by the Australian Financial Security Authority (“AFSA”) the most common path for insolvent individuals is to file for Bankruptcy. However, the undertaking of a Debt Agreement has increased significantly over the last few years and more individuals have put forward proposals of Debt Agreements.
In 2013, a total of 18,601 new Bankruptcy administrations were filed with AFSA Australia wide. Even though this is a significantly large number it has considerably decreased since 2008 in the midst of the Global Financial Crisis. The Global Financial Crisis affected a number of individuals a may have been a significant cause of the filing of 27,520 new Bankruptcy administrations. In at least twenty two years this was the highest number of new Bankruptcy Administrations filed in the space of one year.
Post Global Financial Crisis has shown a decrease in the lodgements of Bankruptcies. The decrease in Bankruptcy may also be attributed to the increase in the statutory amount for a creditor’s petitions rising from $2,000 to $5,000 in August 2010.
Whilst Bankruptcy administrations have decreased there has been an increase of Debt Agreements by approximately 11% between the 2012 and 2013 calendar years. Debt Agreements are a convenient option for some however not all individuals can undertake a Debt Agreement due to debt, asset and income limits that are in place for this type of administration. This is different to a Personal Insolvency Agreement as they are not required to meet these requirements to qualify to propose an agreement to creditors.
Proposing a Personal Insolvency Agreement has always been a less likely option for insolvent individuals. In 1987 a total number of 1285 people submitted a proposal to complete a Personal Insolvency Agreement. However since then the number of proposals put forward every year has decreased significantly. In 2013 a total of 208 individuals submitted proposals which was a decrease of 83.81% since 1987. The possibility of the proposal not being accepted by creditors is a deterrent and may have been a significant influence in the decrease of proposals put forward every year.