RSM Australia

Personal Insolvencies on the Rise

In a sign of the challenging economic circumstances that face certain industries and geographic areas throughout Australia the number of personal insolvencies in Australia has risen by 4.4% in 2015 / 16 as compared to 2014 / 15.

This is the first increase in formal personal insolvencies since the Global Financial Crisis.

A total of 29,527 individuals entered into formal personal insolvency in 2015/16.

Formal Personal Insolvencies comprise:

  • Bankruptcy
  • Personal Insolvency Agreements (PIA’s)
  • Debt Agreements

Bankruptcies can be either voluntary (Debtors Petitions) or involuntary (Creditors Petitions) whilst both PIA’s and Debt Agreements are voluntarily entered into by the debtor.

Geographic locations of bankrupticies

Tellingly, Debt Agreements have reached their highest level on record and Bankruptcies have risen overall for the first time since 2008 / 09.

The most affected geographic areas were:

  • Western Australia (19.5% increase)
  • Northern Territory (15.3%)
  • Queensland (9.3%)
  • Victoria (1.8%)

New South Wales, South Australia, the ACT and Tasmania recorded minor reductions.

The above statistics do not reflect the extensive number of individuals who have come to some form of informal financial payment arrangement with their creditors.

Given the above, it is highly likely professional service providers will at some time come into contact with people who are suffering from a level of financial distress.

Under these challenging ECONOMIC TIMES, options are available.

Options exist for those individuals to address their financial affairs, in the most appropriate manner to ensure the best available outcome for both the individual and the creditors to whom they owe money.

There is no “one cure fits all” solution, and every individual’s circumstances needs to be assessed so that an appropriate solution (be it formal or informal personal insolvency) can be formulated, taking into account all of the effects on the individual.

Managing FInancial distress

The key to managing an individual’s financial distress is to address the issue at the earliest possible time, when the most options remain available, by seeking professional assistance to understand the options available and the effects of decisions.

Importantly, controlling the time of appointment (voluntary) results in the debtor having the greatest level of control over the process, with full knowledge of the expected outcomes and consequences.  This generally results in a more palatable outcome for both the individual and creditors.

The alternative of ignoring or not addressing creditors’ claims and / or reacting to formal legal actions can result in significant adverse financial implications for the individuals, their extended family and result in a potentially lesser return to creditors.

 

Get in touch with a debt solutions specialist

RSM’s Restructuring & Recovery has registered bankruptcy trustees who can advise on personal insolvency.

Our services are available nationally. Please contact us for detailed information.

Authors

Frank Lo Pilato
Managing Partner - Canberra
Greg Dudley
National Head of Restructuring & Recovery
Andrew Bowcher
Partner - Wagga Wagga
Richard Stone
Partner - Sydney
David Mutton
Principal - Melbourne