Bankruptcies and debt agreements hit highs

Bankruptcies and debt agreements hit highs

More Australians are struggling to manage debt, mortgage stress and financial hardship, with the number of bankruptcies and debt agreements around the country increasing over the past three months.

New figures from the Australian Financial Security Authority (AFSA) show 8194 new personal insolvencies over 2017’s September quarter – an 8% increase on the same time last year (7590). This year-on-year rise follows a fall of 3.5% in the June 2017 quarter.

The September 2017 quarter’s personal insolvencies were made up of the following:

  • Bankruptcies increased by 0.1% to 4236 – the highest level since the 4512 recorded the June 2016 quarter.
  • Debt agreements increased by 17.5% to a record high of 3885
  • Personal insolvency agreements increased by 40.4% to 73

According to AFSA, September 2017 is the ninth consecutive quarter where debt agreements have increased in year on year terms.

It’s not just individuals who are struggling in the current economy, but businesses as well, with 16.1% of debtors entering a business-related personal insolvency in the September 2017 quarter – a 0.1% increase on September 2016. The two most commonly recorded business related causes for these insolvencies were economic conditions (382 debtors) and excessive use of credit (2727 debtors).

Despite the recent increase in personal insolvencies, the figures remain below the historical peaks recorded between 2008 and 2010, which saw over 9000 personal insolvencies.

State/Territory Bankruptcies (Parts IV and XI) Debt Agreements (Part IX) Personal insolvency agreements (Part X) Total personal insolvency activity
NSW 1085 1053 15 2153
ACT 47 41 2 90
VIC 837 681 11 1529
QLD 1297 1112 20 2429
SA 298 206 6 510
NT 41 48 2 91
WA 480 507 14 1001
TAS 122 92 2 216
Other* 29 145 1 175
TOTAL 4236 3885 73 8194

Source: AFSA

*State/territory “Other” includes records where no address is stated or where the stated address is not in the Australian Statistical Geography Standard (ASGS).

If you’re struggling with financial hardship, contact the Australian government’s National Debt Hotline on 1800 007 007.

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Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

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Debt consolidation is the process of rolling several old debts into one new debt, usually to save money or for the sake of convenience.

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Generally, bad credit personal loans can be used for the following purposes:

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Some lenders restrict how their bad credit personal loans can be used as part of their commitment to responsible lending – be sure to check before applying.

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Personal loans with no credit checks are available and called ‘payday loans’. These are sometimes used as short-term solutions for cash-strapped Australians. They often carry higher interest rates and fees than regular personal loans, and individuals risk putting themselves into a worsened cycle of debt.

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A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

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In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay an existing $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 20 per cent.

However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.

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If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

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The advantages of personal loans are that they’re easier to obtain than mortgages and usually have lower interest rates than credit cards.

One disadvantage with personal loans is that you have to go through a formal application process, unlike when you borrow money on your credit card. Another disadvantage is that you’ll be charged a higher interest rate than if you borrowed the money as part of a mortgage.

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The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.

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