Bankruptcies are defying the broader surging insolvency trend, driven by low unemployment, rising property values, and a lenient stance from the big-four banks, while interest in Personal Insolvency Agreements – a viable alternative to bankruptcy – grows, reports business recovery and personal insolvency specialist Jirsch Sutherland.
"Bankruptcies are not following the same trajectory as corporate insolvencies, largely due to a trio of factors," says Malcolm Howell, Partner at Jirsch Sutherland. "Firstly, unemployment remains in the '4s,' whereas personal insolvencies typically increase when unemployment exceeds six per cent. 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."
Personal Insolvency Agreements on the rise
In contrast to bankruptcies, Personal Insolvency Agreements (PIAs), also known as Part X agreements, are gaining traction as an effective tool for negotiating legacy debts. According to Australian Financial Security Authority (AFSA) statistics, PIA numbers are nearing pre-COVID levels, highlighting a growing trend in debt management solutions. In FY2019, 188 individuals entered into PIAs, dropping to 167 in 2020. Numbers then dipped sharply to 89 in 2021 before rebounding to 163 in FY2024. In the first half of FY2025 alone, 87 PIAs were recorded, and 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 (DPNs), ineligibility for Debt Agreements, and increasing concerns over personal guarantees," Howell says. "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. The sooner you seek assistance, the more options you have available."
Personal insolvencies expected to catch up
Victor Vuong, Manager at Jirsch Sutherland, anticipates that personal insolvencies will "catch up" in late 2025 or early 2026 as the corporate insolvency domino effect unfolds. "Typically, personal insolvencies trail corporate insolvencies by 12 to 24 months, and we anticipate this pattern will hold," he says. "However, there's still a long way to go before they reach pre-COVID levels, which exceeded 15,000 in FY2019."
While bankruptcies have historically followed increases in the cash rate, Vuong notes that the current economic environment presents a different scenario. "The cash rate has just been cut, unemployment remains low, cost-of-living pressures are still mounting, and the ATO is intensifying its debt-collection efforts," he explains.
