News Service from House Harris

Personal bankruptcy filings just shy of record high

SYDNEY, April 17 AAP - Amid rising debt and unemployment, the number of filings for personal bankruptcy is just shy of a record, says a government agency.

Personal bankruptcies have risen to 7,164 for the March quarter, a report from the Insolvency and Trustee Service of Australia (ITSA) shows.

The number is just five fewer than the record personal bankruptcies of 7,169, in June 2001.

The March quarter 2009 figure represents a 7.75 per cent rise from the from 6,649 bankruptcies lodged in the December quarter and is up 13.66 per cent from the March quarter last year.

ITSA executive director Peter Lowe says 85 per cent of bankruptcies were from consumers who have lost employment or cannot manage credit debt levels.

"The causes that people give on the consumer side of our ledger are loss of income or employment, people moving between jobs and all those factors, or inability to manage their credit levels.

"They're the two biggies."

"Consumer bankruptcies are well over 85 per cent of all bankruptcies," Mr Lowe said.

Total personal insolvency activity, including debt agreements and bankruptcy, rose to 9,300, an increase of 18.25 per cent, compared to 7,865 for the same period in 2007-08.

Mr Lowe said a growing proportion of people were entering into voluntary debt agreements, rather than being declared bankrupt.

The ITSA report showed that in 2008, 2,055 people entered debt agreements, an increase of 36 per cent from 2007/08.

"The bulk of individuals in financial difficulty voluntarily go bankrupt," Mr Lowe said.

"One way of capturing a picture of this is to look at the activity happening under the bankruptcy act."

"A growing proportion of people are taking the initiative and repaying a substantial proportion of their debt.

Hall Chadwick Accountants and Business Advisors partner Paul Leroy said the increase in the number of debt agreements demonstrated the serious nature of personal insolvency.

This situation is very serious and it is clear that despite the latest interest rate cut and government attempts to kick start the economy, personal debt and insolvency are still running high," he said.

"Consumers who are in difficulty are relying more and more on credit to cover day-to-day costs. Something has to happen, consumers can't continue to sustain these current debt levels without long term consequences."

A survey by St George Bank this week found that 35 per cent of respondents planned to use the one-off federal government bonus of as much as $900 to pay down their credit cards and personal debt.