Low unemployment and interest rates, and rising property values have kept bankruptcies in check

Despite the cost-of-living crisis, it has been a trio of factors that has kept personal bankruptcies from blowing out – but that may soon change.

In the 2024 financial year there were 6792 personal bankruptcies

Low unemployment and interest rates plus rising property values have kept a potential wave of personal bankruptcies in check, despite a surge in corporate insolvencies, a leading expert says.

Jirsch Sutherland manager Victor Vuong anticipates that personal insolvencies will “catch up” in late 2025 or early 2026 as the corporate insolvency domino effect unfolds in line with the dramatic increase of the cash rate from 0.1 to 4.35 per cent over the past two years.

“Typically, personal insolvencies trail corporate insolvencies by 12 to 24 months, and we anticipate this pattern will hold,” he said. “However, there’s still a long way to go before they reach pre-Covid levels, which exceeded 15,000 in FY2019.”

Data collected by the Australian Financial Security Authority found there were 6792 bankruptcies in the 2024 financial year, a 75 per cent plunge since the 2008 financial year when the official cash rate at one stage was 7.25 per cent.

Since 2021 when the cash rate fell to 0.1 per cent and unemployment was at historic lows, bankruptcies have been 55 per cent to 60 per cent lower than the FY2019 pre-Covid figure of 15,329.

However, data from the Australian Securities and Investments Commission shows 8540 first appointment insolvencies in the eight months to February 24, a 43 per increase on the corresponding period last year. And there are expectations they will reach more than 13,000 this financial year.

Jirsch Sutherland partner Malcolm Howell said the low personal bankruptcy rate could be attributed to a trio of factors.

“Firstly, unemployment remains in the ‘4s,’ whereas personal insolvencies typically increase when unemployment exceeds 6 per cent,” he said.

“Secondly, rising property prices have boosted equity positions, providing a financial cushion.

“Thirdly, since the 2017 Hayne Royal Commission, the big-four banks have adopted a more supportive stance, offering greater creditor support, enhanced communication with borrowers, and increased access to hardship programs.”

Jirsch Sutherland partner Malcolm Howell.

Personal Insolvency Agreements were gaining traction as an effective tool for negotiating legacy debts. According to AFSA, PIA numbers are nearing pre-Covid levels, highlighting a growing trend in debt management solutions.

In the 2019 financial year, 188 individuals entered into PIAs, dropping to 167 in 2020. Numbers dipped sharply to 89 in 2021 before rebounding to 163 in FY2024.

In the first half of the 2025 financial year alone, 87 PIAs were recorded, and Mr Howell expects this to exceed 170 by the end of the financial year.

“We attribute the uptick in PIA inquiries to several factors, including the burden of legacy debts hindering financial recovery, a surge in Director Penalty Notices, ineligibility for debt agreements, and increasing concerns over personal guarantees,” he said.

“However, the rise in PIA inquiries is a positive shift. PIAs offer a chance to avoid bankruptcy, manage debt more effectively, and retain assets – all while sidestepping the stigma often associated with bankruptcy.

“The increase in inquiries around PIAs also reflects a growing awareness of the importance of seeking help early.”

Originally published as Low unemployment and interest rates, and rising property values have kept bankruptcies in check