Bankruptcy dips as personal insolvency solutions surge, data reveals
Personal insolvency agreements are gaining traction as an effective debt management solution as businesses continue tackling economic hurdles.
New research has revealed that personal insolvency agreements (PIAs), or Part X agreements, are surging in popularity over bankruptcies to effectively negotiate legacy debts.
Based on statistics from the Australian Financial Security Authority (AFSA), PIA numbers had almost reached pre-COVID-19 levels, which demonstrated a growing trend in debt management solutions.
Data highlighted in the first half of this financial year, 87 PIAs had been recorded, following 163 PIAs recorded in the 2024 financial year.
Malcolm Howell, partner of insolvency firm Jirsch Sutherland, said the uptick in PIAs could be attributed to multiple factors.
“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,” Howell 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 was also linked to a growing awareness of the importance of seeking professional help early on.
In contrast to the surge of PIAs, Howell noted bankruptcies were “defying the broader surging insolvency trend”, which was driven by low employment, rising property values and a lenient stance from the big-four banks.
Bankruptcies were not following the same trajectory as corporate insolvencies due to a trio of factors, he added.
“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 age adopted a more supportive stance, offering greater creditor support, enhanced communication with borrowers and increased access to hardship programs.”
Based on market and data analysis, Jirsch Sutherland revealed it also expected personal insolvency numbers to “catch up” in late 2025 or early 2026 as the “corporate insolvency domino effect” unfolded.
Victor Vuong, manager of Jirsch Sutherland, said the firm made this prediction based on the trend that personal insolvencies typically trailed corporate insolvencies by 12 to 24 months.
“There’s still a long way to go before they reach pre-COVID levels, which exceeded 15,000 in FY2019. “The cash rate has just been cut, unemployment remains low, the cost-of-living pressures are still mounting, and the ATO is intensifying its debt collection efforts,” Vuong said.
“While bankruptcies have historically followed increases in the cash rate, the current economic environment presents a different scenario.”
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