Feature Article—Bankruptcies
In general terms, a person who is unable to pay their debts by due dates
may be declared bankrupt.
This state of bankruptcy may be requested by an insolvent person themself
by a ‘debtor’s petition’ to the Insolvency and Trustee Service Australia—the
responsible Australian government body—or can be requested by creditors.
Bankruptcies can be considered one measure of the state of economic conditions
at any time, with bankruptcies tending to increase during times of recession.
Bankruptcies since 1948–49
Figure 1 shows total bankruptcies in the period since 1948–49.
The two obvious peaks in the number of bankruptcies are during the 1991–92
recession and during the economic slowdown around 1998–99.
Recent trends
Figure 2 shows total bankruptcies each quarter since the September quarter
1995. From a peak of over 7 000 in the June quarter 2001—when economic
growth was the lowest it had been for nearly ten years—the quarterly number
of bankruptcies has trended downwards to about 5 000 each quarter.
Part of this recent reduction can be attributed to the use of debt arrangements
as an alternative to bankruptcy.
Business related bankruptcies
Business related bankruptcies are those where an individual’s bankruptcy
is directly related to their interest in a business. Figure 3 shows for
the period since 1988–89, the proportion of bankruptcies which were business
related. These figures show that from a peak of about 35 per cent
in 1989–90, the percentage of business related bankruptcies has declined
to around 20 per cent now.
Non-business related bankruptcies
Non-business related bankruptcies are all bankruptcies which are not
related to an individual’s interest in a business. Table 1 shows the underlying
cause of 2004–05 bankruptcies which were non-business related.
Table 1.
Causes of non-business bankruptcy
2004–05 |
| Cause |
Number |
Per
cent |
| Unemployment |
5 761 |
35.3 |
| Excessive
use of credit |
4 082 |
25.0 |
| Domestic
discord |
2 109 |
12.9 |
| Ill
health |
1 810 |
11.1 |
| Adverse
litigation |
843 |
5.2 |
| Gambling
or speculation |
480 |
2.9 |
| Liabilities
on guarantees |
292 |
1.8 |
| Other |
947 |
5.8 |
| Total |
16 324 |
100.0 |
This table shows that in excess of one-third of all non-business related
bankruptcies were attributed to unemployment and a further quarter were
attributed to credit card debt.
MESI table 4.5
Monthly Economic and Social Indicators table 4.5 shows for the past five
years:
- the quarterly number of bankruptcies, and annual totals, and
- the annual percentage change in quarterly bankruptcies and in annual
totals.
The annual percentage change in quarterly bankruptcies is graphed over
the past twenty quarters (five years).
MESI e-data table 4.5
MESI e-data tables show the number of bankruptcies quarterly from the
September quarter 1985 and annually from 1948–49; and annual percentage
changes quarterly from the September quarter 1986 and annually from 1949–50.
Quarterly numbers of bankruptcies are graphed from the September quarter
1985 to date.
This feature was prepared by Greg Baker
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