State of the Personal Insolvency System 2024-25

Introduction

The Australian Financial Security Authority (AFSA) is an executive agency in the Treasury portfolio. We are responsible for Australia's personal insolvency and personal property securities systems, as well as managing criminal assets, which:

• provide Australian consumers and businesses with tools to manage credit risk
• contribute to investor and business confidence
• provide enhanced access to finance within the economy
• enable the dispersal of proceeds of crime to the Australian community.

Summary

The personal insolvency system continues to evolve, shaped by shifts in Australia's credit landscape, economic conditions and borrower behaviour.

In 2024–25, 12,257 individuals entered personal insolvency – a 5.3% increase from the previous year and the third consecutive annual rise. While volumes remain below pre-COVID-19 levels, the upward trend signals moderate financial stress among households and small businesses.

Excessive borrowing remains the leading self-reported cause of insolvency, cited by 37.3% of debtors, followed by unemployment and business failure. Nearly half of all debtors had liabilities under $50,000, reinforcing the system's role as a safety net for financially vulnerable individuals.

Business-related personal insolvencies accounted for 28.8% of new cases but represented 78.8% of new liabilities, highlighting the disproportionate impact of distress among sole traders and small business operators. The Construction and Other Services industries were the most affected, together accounting for over one-third of business-related personal insolvencies.

The system is increasingly shaped by a small number of high-debt outliers. In 2024–25, 79 individuals with total liabilities over $10 million accounted for $3.9 billion or 59.3% of new liabilities, distorting average figures and underscoring the importance of distributional analysis.

Financial resilience is declining. One in 5 debtors had an asset-to-liability ratio below 10%, meaning they held less than 10 cents in assets for every dollar of debt. This trend reflects growing vulnerability among individuals with limited buffers to absorb financial shocks.

Creditor dynamics are shifting. The Australian Taxation Office (ATO) remains the largest single creditor, while traditional banks have tightened lending standards and continue to retreat from exposure to riskier lending. In their place, subprime and Buy Now, Pay Later (BNPL) lenders are gaining ground, with 48.9% of new debtors holding BNPL liabilities – a trend most pronounced among younger borrowers. Among debtors aged 29 or younger, this figure rises to 65.2%, indicating growing exposure to alternative credit models among younger Australians.

Looking ahead, personal insolvency volumes are forecast to rise moderately to 13,000 in 2025–26 and 13,750 in 2026–27, driven by stabilising credit conditions and persistent cost-of-living pressures.

This report offers strategic insights into the system's trajectory – not just who is affected, but why – and what these patterns reveal about the dynamics of Australia's $3.9 trillion credit system.

Market insights and macroeconomic context

Economic conditions stabilised over the 12 months to June 2025, with recovery back on track – though rising uncertainties persisted. Since June 2022, the economy has grown modestly, but over the past year, growth exceeded expectations for the first time in 2 years, expanding by 1.8% compared to the forecast of 1.6%. This stronger-than-anticipated performance was largely driven by robust household consumption in the first half of 2025.

Despite signs of recovery, uncertainty is mounting. The Reserve Bank of Australia (RBA) and financial market economists have continued revising down the Gross Domestic Product (GDP) growth forecasts – with GDP growth anticipated to be 2% in 2027 reflecting persistent concerns over Australia's low productivity. Private business investment strengthened noticeably in the second half of calendar year 2025, following a prolonged period of stagnation. However, this improvement has been largely offset by a decline in public sector investment. While private sector spending and investment are showing early signs of recovery, overall confidence remains subdued. If private activity does not accelerate sufficiently to compensate for reduced public investment – particularly in job-intensive sectors – unemployment could rise more sharply. Indeed, the unemployment rate increased to 4.3% in June 2025 and 4.5% in September 2025, outpacing expectations.

Cost-of-living pressures eased for many households between mid-2024 and mid-2025, supported by inflation reducing within the RBA's target range over the same period. This easing contributed to the RBA's first cash rate cut in May 2025, followed by another in August, lowering the rate to 3.6%. However, the recent spike in inflation, which lifted headline inflation to 3.2% and underlying inflation to 3% in the September quarter 2025, indicates that cost-of-living pressures have risen again. The RBA has revised its inflation outlook upward, now expecting headline inflation to reach 3.7% and underlying inflation 3.2% by mid-2026 – both above the target range – and not return within target until late 2027. This revision suggests that the likelihood of cash rate cuts in 2026 is now more remote.

Lower interest rates are expected to support a recovery in credit growth, which has remained subdued over the past 3 years. Year-on-year credit growth has been rising since mid-2024, reaching 6.9% and 7.3% in the 12 months to June and September 2025 respectively – driven largely by strong mortgage lending. Such growth rates were the highest level since early 2023.

While the diminished likelihood of further cash rate cuts in 2026 may weigh on the overall credit outlook, personal credit – particularly credit card lending – may continue to grow at a steady pace. The personal credit-to-GDP ratio has gradually trended upward since early 2024, reversing a decade-long decline.^[1] This shift reflects a change in borrower behaviour; since the introduction of mortgage offset facilities in the early 2010s, many households have used these to meet their credit needs instead of relying on personal loans or credit cards. However, amid a high level of living expenses households are increasingly turning back to personal loans and credit cards to manage short-term budget constraints. With wage growth normalising (slowing to 3.4% in the year to June 2025, down from 4.1% in the year to June 2024) and high cost-of-living pressure intensifying amid a resurgence in inflation personal credit in relation to GDP is likely to continue trending upward.

Credit risk has stabilised, though signs of financial stress remain evident, and the external environment is marked by heightened geopolitical and cyber risks. The mortgage stress indicator, as of June 2025, showed a slight uptick, while non-performing loan ratios remain unchanged from the March quarter.^[2] While credit risk has remained largely manageable, it may begin to rise in 2026 as the likelihood of further interest rate cuts diminishes, as noted above.

Personal insolvency trends closely mirror movements in personal credit, given most liabilities in the system stem from personal credit. The correlation between personal credit and personal insolvency, both in terms of volumes and liabilities, is strong (+0.8). With personal credit expected to continue trending upward, albeit moderately, and credit risk being manageable, personal insolvencies are forecast to rise at a modest pace over the next 12 to 18 months.

Nevertheless, AFSA remains vigilant, closely monitoring evolving macroeconomic and credit conditions, particularly as recent shifts in inflation trends signal a more uncertain economic outlook. A modest economic recovery, persistently low productivity, and escalating geopolitical and trade tensions could weaken the labour market and drive unemployment higher than anticipated. In this context, heightened financial hardship – affecting both unemployed and employed households amid resurgent cost-of-living pressures – may increase credit risk and accelerate the growth of personal insolvencies over the next 12 to 18 months.

Personal insolvency snapshot

Personal insolvency can arise from a complex mix of social, health and economic circumstances. Broader economic conditions, such as households' saving behaviour (including cost-of-living pressures), the unemployment rate, high interest rates affecting debt servicing capacity, and the volume of credit borrowed, play a significant role in shaping insolvency volumes. These factors are often compounded by evolving behaviours among debtors and creditors, including how debts are managed, collected and resolved.

There are 4 personal insolvency options available under the Bankruptcy Act to help deal with unmanageable debt:

1. bankruptcy
2. debt agreement
3. personal insolvency agreement (PIA)
4. temporary debt protection.

Historically, personal insolvencies have followed trends in corporate insolvencies with a lag of approximately 9–12 months. However, this correlation has been less evident in the current environment. The Australian Securities and Investment Commission (ASIC) reported 14,722 corporate insolvencies in 2024–25, which is the highest recorded level since 1999–2000 (when public data are available) and exceeds the pre-COVID-19 average of 8,219 corporate insolvencies per year.^[3] However, personal insolvency volumes are increasing only modestly and remain below the pre-COVID-19 average of 28,372 personal insolvencies per year.^[4]

In 2024–25, 12,257 individuals entered personal insolvency, a 5.3% increase from new personal insolvencies in 2023–24. This is the third consecutive annual rise following the significant COVID-19-related declines observed between 2019–20 and 2021–22 (Table 1).

The 12,257 new insolvencies comprised:

• 6,930 bankruptcies (56.5%)
• 5,093 debt agreements (41.6%)
• 210 PIAs (1.7%)
• 24 deceased estates (0.2%).

These proportions are broadly consistent with historical patterns, with bankruptcies and debt agreements continuing to be the most common personal insolvency options.

Bankruptcy typically releases a person from most of their debts after a period of at least 3 years and one day, while debt agreements allow individuals to repay a portion of their liabilities over time under more manageable terms.

PIAs, by contrast are generally suited to more complex financial situations involving multiple creditors or substantial debts. Although there are no liability, asset or income thresholds that apply to PIAs, they are less commonly used due to comparatively higher fees and charges, which can make them a less suitable option for some debtors.

Among bankruptcies, 88.1% (6,106) were initiated by individuals themselves through a debtor's petition, while 11.9% (824) were court ordered through a sequestration order.

In 2024–25, when self-identifying their reasons for entering insolvency, 37.3% of individuals cited excessive borrowing or credit, followed by unemployment (22.0%) and business failure (17.9%).^[5] While this marks a decline from 2020–21, when 42.8% of insolvencies cited excessive borrowing, it remains the most commonly reported cause of personal insolvency. This may reflect ongoing cost-of-living pressures, particularly for individuals with lower incomes or limited assets, who may be less resilient to financial shocks (Figure 2).

Other drivers included marriage/relationship breakdowns (14.2%), health-related financial stress (11.9%), and a reduction in personal/family income (8.9%). The proportion of insolvencies citing these reasons have remained relatively stable over time, suggesting a consistent link between personal and social circumstances (or disruptions) and the risk of insolvency.

Gambling or speculation was volunteered as a driver by a small proportion of individuals (2.7%). This proportion has been relatively consistent over time (around 2–3% since 2009–10) but is nevertheless worth monitoring as a potential risk factor for entering personal insolvency.

These drivers reflect a mix of structural financial pressures and personal circumstances, highlighting the layered causes behind personal insolvency.
 

Demographics

In 2024–25, personal insolvency was most common among individuals aged 30–44, who accounted for nearly 40% of all new insolvencies. The largest single age group was 30–34 (14.0%), followed by 35–39 (13.3%) and 25–29 (12.7%). These groups are almost twice as over-represented in the personal insolvency system compared to their share of the general population, suggesting they may be particularly affected by cost-of-living and housing affordability pressures, while also being at earlier stages of their careers. It is also possible that BNPL products and other types of subprime lending are contributing to the financial burden experienced by these individuals.

The median age for new entrants into personal insolvency was 40 years, up from 39 years in 2023–24, suggesting that the personal insolvency cohort is ageing slightly over time. Similarly, the average age increased slightly, from 41.0 in 2023–24 to 41.3 in 2024–25.

In contrast, individuals aged 60 and above represented 9.4% of all new insolvencies, despite making up 22.9% of the Australian population. This equates to an under-representation ratio of 0.4, suggesting that older cohorts may have greater financial stability or fewer debt obligations.

The gender distribution of personal insolvencies has remained relatively stable over time, and the 2024–25 data aligns with historical trends. In this period, men accounted for the majority of new personal insolvencies (55.5%), followed by women (40.8%). A small proportion of debtors (3.7%) either identified as 'other' or did not disclose their gender.

Geographically, personal insolvency volumes broadly align with population spread, though some states are slightly over- or under-represented.^[6] New South Wales recorded the highest share of personal insolvencies (31.1%), which closely matches its share of the national population (31.2%). Queensland accounted for 24.6% of insolvencies, higher than its population share of 20.4%, suggesting a relative over-representation. Victoria contributed 20.5% of insolvencies, which is below its population share of 25.6%. Collectively, these 3 states accounted for over three-quarters of all new insolvencies, consistent with their combined population share.

Queensland may have been over-represented in the 2024–25 statistics due to the economic impact of natural disaster events including ex-Tropical Cyclone Alfred and other significant storm activity throughout the state. These events led to uninsured losses, loss of income and disruption to general business activity. The cumulative impact was estimated to have contributed to a reduction of approximately $1 billion (around ¼ percentage point) of Queensland's Gross State Product, which may have contributed to slightly elevated numbers of personal insolvencies during the period.^[7]

Western Australia (7.8%) and South Australia (5.0%) contributed more modest volumes, which are slightly below their respective population shares of 10.9% and 7.0%. The remaining jurisdictions – Tasmania, Australian Capital Territory, and Northern Territory – each represented less than 3% of the national total, broadly in line with their population proportions.

When comparing metropolitan and regional areas, the personal insolvency system shows a slight skew toward metropolitan regions. The majority of new personal insolvencies (58.5%) occurred in metropolitan areas, with Greater Sydney (18.6%), Greater Melbourne (14.7%), and Greater Brisbane (12.5%) recording the highest volumes. According to Australian Bureau of Statistics (ABS) data, 67.7% of Australia's population resides in capital cities (Greater Capital City Statistical Areas), while 32.2% live in regional areas.^[8] This suggests that regional areas may be slightly over-represented in personal insolvency volumes, with 34.6% of cases occurring outside capital cities. Notable volumes were observed in the rest of New South Wales and Queensland.^[9]

Where entrants to personal insolvency had identified an industry of employment, personal insolvency was most prevalent among individuals working in Construction (12.5%), Health care and social assistance (11.2%), and Transport, postal and warehousing (9.3%).^[10] The top 5 industries, also including Other services and Retail trade, accounted for just over half (51.2%) of all insolvencies.^[11] The remaining insolvencies were spread across a wide range of sectors, with smaller proportions in Professional services, Agriculture, and Public administration.

When compared to workforce share, Other services and Transport, postal and warehousing sectors are significantly over-represented in personal insolvency volumes (Figure 3). In contrast, Health care and social assistance and Retail trade are under-represented, suggesting greater financial resilience or more stable employment conditions in these industries.
 

System trends and regulatory insights

Personal insolvency affects a wide range of individuals and organisations, including debtors (those who owe money), creditors (those to whom money is owed) and practitioners (those who administer insolvency matters). Among debtors, some are experiencing personal financial distress, while others are facing insolvency due to business-related financial difficulties.

As of 30 June 2025, there were 39,851 active personal insolvencies, involving $19.3 billion in liabilities owed to 33,992 creditors. Of these, 12,257 were new personal insolvencies recorded in 2024–25, accounting for $6.6 billion in new liabilities.

Debtor liabilities and assets

The personal insolvency system is predominantly composed of individuals with modest debt levels. In 2024–25, 45.0% of entrants had less than $50,000 in liabilities, and 20.9% had between $50,000 and $100,000 (Figure 4). This consistent trend over time highlights that most people entering the system are not burdened by excessive debt, but rather by liabilities that have become unmanageable due to limited financial resilience.

Although low-liability cases dominate, average liability figures are significantly skewed by a small number of individuals with exceptionally high debt. In 2024–25, 79 individuals with liabilities over $10 million accounted for $3.9 billion or 59.3% of new liabilities in 2024–25. These outliers distort system-wide statistics, inflating average liability figures and misrepresenting the typical debtor profile.

While this is a slight decline from 2023–24, when 46 individuals (who had more than $10 million in liabilities) made up 66.3% of all new liabilities, it remains well above historical norms (pre-COVID-19), where such individuals typically comprised less than 20% of total new liabilities.

This shift may signal an emerging trend in which a small number of individuals increasingly account for a large share of system liabilities.

These patterns reinforce the importance of using median values and distributional analysis to understand the system more accurately. The typical debtor, represented by the median, has far lower liabilities and is more likely experiencing financial vulnerability rather than managing large-scale debt. High-liability cases represent just 0.6% of debtors in 2024–25 and are not reflective of the broader population.

Most individuals entering insolvency have low incomes, limited assets, and few financial options, making them more susceptible to financial distress. The overrepresentation of renters and holders of unsecured debt points to financial fragility as a key driver of system entry. These individuals may also face additional risks, including exploitation by those seeking to take advantage of their vulnerable circumstances. The combination of low liabilities and low assets suggests a broader issue of financial fragility, where even relatively small debts can trigger insolvency when there is no buffer to absorb economic shocks or unexpected expenses.

Limited assets also mean that many individuals entering the system have thin savings buffers. The asset-to-liability ratio serves as a useful proxy for financial resilience – those with low ratios are less able to withstand economic shocks. In 2024–25, 20.0% of debtors had an asset-to-liability ratio below 10%, meaning that for every $1 of debt, they held less than 10 cents in assets (Figure 5). This indicates extremely limited capacity to absorb financial stress, leaving individuals highly exposed to insolvency if faced with unexpected expenses or income disruptions. The declining trend in asset-to-liability ratios from 2018–19 to 2024–25 reflects growing exposure to financial risk during a period marked by elevated inflation, rising stress, and stagnant growth following the COVID-19 pandemic.
 

By contrast, pre-COVID-19 periods of relative economic stability saw a more even spread across asset-to-liability brackets, suggesting that insolvency in those years may have been driven more by factors like excessive debt or life events, rather than acute financial distress amplified by low asset buffers.

Overall, low liabilities do not imply financial stability. When paired with low assets, even modest debts can become unmanageable. In this context, the personal insolvency system functions primarily as a safety net for financially vulnerable individuals, rather than as a mechanism for resolving high-value financial failures.

Recent behavioural shifts suggest that creditors are engaging earlier with debtors, and debtors are increasingly seeking hardship or debt-relief solutions that may help delay entry into insolvency. These changes may reflect increased awareness of hardship relief measures introduced during the COVID-19 response, which have provided greater flexibility for managing liabilities under difficult circumstances.

Credit preferences also appear to be changing. From 2014–15 to 2022–23, the use of credit cards and personal loans had started to decline in favour of products like mortgage offset and redraw accounts, which allow users to access funds without taking out additional lines of credit. However, since 2023–24, credit card usage has risen again, potentially in line with cost-of-living pressures.

Riskier products such as payday loans and cash converter services appear to be gaining traction, with the share of individuals owing money to BNPL providers nearly tripling and subprime lender exposure nearly doubling in 2024–25. This shift suggests growing reliance on more accessible but riskier forms of credit, further increasing vulnerability among those entering the personal insolvency system.

Business-related personal insolvencies

AFSA manages personal insolvencies, including business-related personal insolvencies involving sole traders, partnerships and individuals with company-related liabilities. Business-related personal insolvencies form a distinct subset of the debtor cohort, characterised by elevated liability levels and broader systemic implications. These insolvencies typically involve individuals whose financial distress is connected to business activity – such as operating as a sole trader or having served as a company director, secretary, or other management role.

• Sole traders: Individuals operating unincorporated businesses under their own name, where the business is not a separate legal entity. The sole trader is personally responsible for all aspects of the business, including debts and liabilities, meaning personal and business finances are legally inseparable. If the business fails, the individual may enter personal insolvency to resolve both personal and business-related debts.
• Partnerships: A business structure involving 2 or more people who share income, losses and management responsibilities. In a general partnership, each partner has unlimited personal liability for the debts and obligations of the business. If the partnership becomes insolvent, individual partners may be personally liable and subject to personal insolvency proceedings.
• Company-related personal liability (company directors or guarantors): While companies are separate legal entities governed under the Corporations Act 2001 (Cth) and regulated by ASIC, individuals may still be personally liable for company debts in certain circumstances. This includes:
  • providing personal guarantees on business loans or leases o receiving Director Penalty Notices from the ATO for unpaid tax or superannuation
  • being held personally liable for debts due to insolvent trading or breaches of director duties
  • having served as a director within the preceding 5 years, which may link personal liability to company failure.

These individuals may enter personal insolvency if they are unable to meet financial obligations arising from their business involvement. In contrast, corporate insolvencies – where the company itself is insolvent – are regulated by ASIC and fall outside AFSA's jurisdiction.

As of 30 June 2025, business-related insolvencies accounted for 27.1% (10,810) of active personal insolvencies, with total liabilities of $15.4 billion. The average liability was $1.4 million, though the median was significantly lower at $206,840, indicating a small number of very high-debt insolvencies. Although business-related personal insolvencies account for just over a quarter of all active personal insolvencies, they represent the majority of outstanding debt to creditors – approximately $15.4 billion out of $19.3 billion, or 79.4% of total liabilities. This underscores the significant role the business community plays within the personal insolvency framework and highlights how a small number of high-debt cases can shape overall system dynamics (Figure 6).
 

The majority of business-related personal insolvencies were bankruptcies initiated by the debtor (72.6%). By comparison, non-business-related personal insolvencies made up the remaining 72.9% (29,041), with total liabilities of $4.0 billion, an average liability of $150,781, and a median of $39,534.

There were 3,536 new business-related personal insolvencies in 2024–25, representing 28.8% of all new personal insolvencies and $5.2 billion in liabilities (78.8%). This is the highest proportion since 2013–14, when business-related personal insolvencies comprised 30.8% of all new personal insolvencies. The uptick in business-related personal insolvencies has been trending upward since 2022–23 (Figure 7).

Most business-related personal insolvencies were bankruptcies (88.2%). This is significantly higher than the 43.7% observed in non-business-related personal insolvencies. Among business-related bankruptcies, 92.2% were initiated by the debtor, while the remaining 7.8% resulted from sequestration orders issued by the court.

This reflects the nature of business-related financial distress. Bankruptcy is more likely than negotiated alternatives (such as debt agreements or PIAs) due to the size and complexity of liabilities or urgency of legal action following business failure. The predominance of debtor-initiated bankruptcies suggests that many individuals are actively seeking resolution, rather than being forced into personal insolvency by creditors.

In 2024–25, business failure was the most commonly (56.5%) reported reason for entering personal insolvency among business-related personal insolvencies. This was followed by excessive borrowing and credit. Business failure has been increasingly cited as a cause for insolvency since COVID-19 when many hardship and relief measures were put in place to slow or prevent business insolvency.

Common triggers of business failure for unincorporated and small businesses include:

• poor cash flow or revenue collapse
• loss of major contracts or clients
• rising costs
• tax debts
• personal guarantees on business loans.

Business-related personal insolvencies were most concentrated to individuals working in the following industries:^[14]

• construction: 22.9%
• other services: 12.6%
• transport, postal and warehousing: 9.0%
• accommodation and food services: 8.4%
• health care and social assistance: 7.5%
• retail trade: 7.1%.

Together, these 6 industries accounted for 67.5% of all business-related personal insolvencies.

The prominence of construction and transport highlights the vulnerability of small business operators and subcontractors to contract risk, cash flow volatility, and market fluctuations. The presence of retail and service sectors points to the diversity of business models affected, including those with high exposure to consumer demand and operating costs.

The construction industry has consistently had the highest number of business-related personal insolvencies, both pre- and post-COVID-19. This might be due to the nature of the industry, which often involves subcontractors, small firms and sole traders providing services to larger businesses prior to full payment being made, leaving the smaller business at risk in the case of default.

Creditors

As of 30 June 2025, active personal insolvencies involved $19.3 billion in liabilities owed to 33,992 creditors. This reflects the total value of liabilities currently in the system, across all undischarged personal insolvency administrations. The average liability per creditor was $568,906, but the median was just $7,431, again highlighting the skewed nature of the system.

A small number of creditors dominate the landscape: just 258 creditors (0.8%) held 80.0% of total liabilities and 50 creditors alone held 63.9% of all liabilities by value.

Creditors in the personal insolvency system include government bodies, businesses, and individuals. Of the $19.3 billion of total liabilities:

• business creditors were owed $14.5 billion (75.0%)
• government agencies were owed $3.4 billion (17.4%)
• individual creditors were owed $1.2 billion (6.2%).

Business creditors span a range of sectors, each with distinct relationships to personal insolvency.^[16]

The largest exposures were to:

• finance and lending: $3.9 billion
• real estate, property development and management: $2.6 billion
• the Big Four banks: $1.9 billion
• other banking institutions: $1.1 billion
• insolvency services sector: $1.0 billion.^[17]

Together, these sectors represent over half of all liabilities in the system. The scale of debts owed to financial institutions points to a strong link between credit access and personal insolvency outcomes, particularly through unsecured lending. In contrast, the significant exposure to property-related sectors is largely driven by a small number of high-liability individuals. These cases, while few in number, have a disproportionate impact on total system liabilities and creditor concentration.

Individual creditors, while representing a small share of liabilities (6.2%), often relate to unpaid wages, personal loans, or family investments. These creditors may themselves be financially vulnerable and less familiar with insolvency processes. Ensuring equitable access to information and participation in proceedings remains a key consideration for system fairness.

Over the decade since 2014–15, the composition of debt in the personal insolvency system has shifted significantly. Secured liabilities have declined from 31.3% of total liabilities in 2014–15 to just 13.3% in 2024–25, while unsecured liabilities have grown from 68.7% to 86.7% over the same period. This trend suggests that more stable, asset-backed debt is being replaced by riskier unsecured credit. It also reflects broader changes in lending behaviour, particularly among traditional lenders – including major banks – who have gradually reduced exposure to high-risk customers in favour of lower-risk asset-backed lending.

This shift is also evident in the changing profile of creditors within the personal insolvency system. In 2018–19, 68.1% of individuals entering personal insolvency had debts with the Big Four banks (and their subsidiaries). By 2024–25, this had declined to 51.5%, indicating a retreat by large, regulated institutions such as Authorised Deposit-taking Institutions (ADIs) (Figure 8). This change may be driven by tighter oversight following the Hayne Royal Commission, as well as commercial decisions to reduce portfolio risk.^[18]

As traditional lenders step back, we are seeing increased participation from niche lenders. These include non-bank and other lenders (e.g. Latitude Financial, Pepper Money, Money3, Nimble) which service higher-risk borrowers. While the total value of debts owed to these lenders remains relatively small – just 2% of new personal insolvency liabilities in 2024–25 – their reach is expanding. In 2024–25, 47.5% of all debtors had at least one subprime debt, indicating growing exposure to non-ADI lenders. Unlike ADIs, which operate using public deposits and are subject to prudential regulation, these lenders use private investor funding and are subject to limited regulatory oversight.

Debtors may also be engaging with other system participants such as debt collection agencies and debt management firms. Debt collection agencies (507 operating in Australia^[19]) purchase debt from creditors and then engage directly with debtors to recover funds, in what may resemble a form of unregulated debt repayment plan. Similarly, debt management firms (95 operating in Australia^[20]) provide services to debtors which may include financial planning, debt negotiation and complaint and dispute resolution support. These firms may also provide pre-insolvency advice and unregulated or informal debt agreement services which are not always in the best interest of the debtor (for example, by charging a fee for the debtor to enter bankruptcy, which the debtor could have done for free). As a result, debtors engaging with these firms may not receive all of the protections and benefits (such as having known timeframes, known fees, interest freezes and creditor binds) that they would under a formally regulated debt agreement.

The contraction of personal credit overall adds further context. In 2008, personal credit (of which approximately 80% is unsecured) was equivalent to 14% of GDP. By 2024–25, it had fallen to around 6%. However, this type of credit is often inaccessible to vulnerable debtors, who may instead turn to niche lenders with less stringent lending criteria. This has enabled product innovation in the unsecured credit market and the emergence of new players.

One of the most notable shifts is the rise in BNPL and payday lending services. In 2014–15, 3.7% of new debtors entering personal insolvency had a BNPL debt. By 2024–25, this figure has risen to 47.0%. When considering all active personal insolvencies, the most used services were Zip Pay and After Pay. Zip Pay had 4,075 unique debtors with an average liability of $2,899, and After Pay had 3,268 unique debtors with an average liability of $1,266.

While BNPL liabilities still only represent a small portion of total liabilities (less than 0.3%), their rapid growth, particularly among younger borrowers, signals a shift in consumer credit behaviour.

These models may pose systemic risks, especially due to overextension and limited hardship support. AFSA continues to monitor these sectors and engage with ASIC on consumer credit regulation.

Under the Bankruptcy Act, a creditor owed at least $10,000 may apply to the court to make a debtor bankrupt through a creditor's petition. If successful, the court issues a sequestration order. This is one of the most direct and formal tools available to creditors, and its use offers insight into broader debt management practices and enforcement posture.

There is a large skew in the creditor's petitions data. In 2024–25, the ATO undertook 247 petitions, with a combined value of $184 million, making it the largest petitioning creditor by both volume and value. While this reflects a continued presence in formal enforcement, it also aligns with the ATO's more measured collections posture following the COVID-19 period.

More broadly, the ATO's share of creditor's petitions by value has shifted over time – from 44.3% in 2018–19 to just 10.9% in 2020–21, before rising again to 19.6% in 2024–25.

The Big Four banks have followed a similar trajectory, reducing their share from 10.8% in 2018–19 to 3.3% in 2024–25. This may reflect a more balanced approach to debt recovery activities, shaped by hardship measures introduced during COVID-19 and ongoing reforms following the Hayne Royal Commission.

While the total number of creditor petitions reached a low of 671 in 2020–21 (valued at $478 million), the number and value have been gradually increasing, reaching 1,447 petitions valued at $942 million in 2024–25 (Figure 10). Notably, the median value of $91,888 is significantly elevated, likely due to a small number of high-value petitions. This might suggest that, while the ATO and the Big Four banks have started to decrease their use of petitions, other creditors may be adopting more assertive recovery strategies.
 

Practitioners

Personal insolvency practitioners are responsible for administering insolvent estates. They play a key role in maintaining the integrity of the personal insolvency system and delivering fair outcomes for creditors. Their duties include investigating financial affairs, realising assets, distributing funds to creditors, and ensuring compliance with legislative requirements.

AFSA regulates 3 types of practitioners:

• The Official Trustee in Bankruptcy (Official Trustee): A body corporate within AFSA that administers estates where no private trustee is appointed. It plays a significant public value role by fairly and effectively managing estates regardless of their asset recovery potential and often not commercially viable for private trustees to administer. This includes estates where there are high levels of vulnerability and/or complex litigation matters which need resolving.
• Registered Trustees (RTs): Private sector individuals authorised to administer bankruptcies and PIAs.
• Registered Debt Agreement Administrators (RDAAs): Private sector individuals or companies authorised to administer debt agreements under Part IX of the Bankruptcy Act.

At the close of 2024–25, there were 267 registered personal insolvency practitioners, comprising 212 RTs and 55 RDAAs. These are individuals (or companies in the case of RDAAs) that are formally registered with AFSA to administer personal insolvency matters.

Practitioner numbers remained stable during the year, with 7 new registrations and 7 de-registrations. While application volumes have slightly declined over the past 3 years (12 in 2024–25, down from 13 and 16), the overall practitioner base has remained consistent.

The distribution of insolvency administrations across practitioner types highlights the distinct roles played by each group (Figure 11). The Official Trustee administered 71.2% of bankruptcy administrations, while RTs handled the remaining 28.8%. Debt agreements were managed exclusively by RDAAs, and PIAs were administered solely by RTs. For Deceased Estates, 91.7% were overseen by RTs, with the remaining 8.3% managed by the Official Trustee. This distribution reflects the legislative boundaries and specialisations of each practitioner type within the personal insolvency system.

Although RTs are registered as individuals, they typically operate within commercial businesses that provide insolvency services. These firms vary in size and structure and may support multiple registered practitioners.

At the close of 2024–25, RTs who were not operating as sole traders were spread across 99 RT firms. RDAAs include both individuals and companies: of the 55 RDAAs, 27 were company-based, with each company required to nominate at least one Person with Overall Management Responsibility (POMR) – an individual RDAA accountable for the company's debt agreement activities.

AFSA uses a tiering model to help determine the level of regulatory attention and engagement required for each practitioner:

• Tier 1 firms have the greatest impact on the personal insolvency system. They are the largest operators and manage the majority of insolvency volumes – approximately 75% of active personal insolvencies. There are 9 Tier 1 firms, which includes the Official Trustee.
• Tier 2 and Tier 3 firms, which together comprise over 90% of firms, handle a smaller share of cases, reflecting their more moderate impact on system outcomes.

In addition to the volume of personal insolvencies the firms are administering, the tiering system also considers the value of payments handled as part of those administrations.

AFSA collects detailed financial data from practitioners through their Annual Administration Returns, which provide information on how funds are managed across all active personal insolvency estates. This includes payments made to creditors, practitioner remuneration, and other administrative costs (which includes costs such as legal fees and payments to AFSA). The data enables AFSA to monitor trends in estate administration, assess practitioner conduct, and identify systemic risks – similar to how the ATO uses nearest neighbour comparisons to detect anomalies in taxpayer behaviour.

This financial breakdown enables AFSA to see how funds move through the personal insolvency system and where regulatory attention may be warranted to support fair and efficient estate administration. Costs can vary significantly depending on the type of administration (e.g. bankruptcy vs debt agreement), the complexity of individual estates, and factors such as economies of scale or vertical supply chain efficiencies.

In 2024–25, AFSA regulated $377.5 million in payments from individuals in the personal insolvency system (Table 2). Of this amount, nearly half (46.5%, or $175.7 million) was returned to creditors. A further $91.0 million (24.1%) was paid in practitioner remuneration, of which $72.4 million was paid to RTs, $17.7 million to RDAAs, and $0.9 million was recovered by the Official Trustee. The remaining $110.7 million (29.3%) was attributed to other administration costs.^[22]

To ensure that remuneration and expenses are proportionate to the work performed, further insights are needed into the drivers of cost variation (see Appendix 2). This will strengthen AFSA’s ability to uphold its regulatory objectives – promoting fairness, transparency, and system-wide efficiency.

Forecast

AFSA produces forward-looking forecasts of personal insolvency volumes to support strategic planning, operational readiness, and public engagement. These forecasts help anticipate system pressures and inform regulatory and service delivery priorities.

AFSA's forecasting approach draws on historical trends, recent activity and expert assessments of economic and credit conditions to forecast quarterly personal insolvency volumes up to 8 quarters ahead.

Personal insolvency volumes have continued their upward trajectory in 2024–25, an increase of 5.3% compared to 
2023–24. This growth follows a 17.3% rise in the previous year, indicating a deceleration in the rate of increase.

Despite this upward trend, volumes remain significantly below the 10-year average of 19,586, reflecting the enduring impact of structural changes in the credit system and broader economic conditions.

Based on data to 30 June 2025 and current economic indicators, AFSA forecasts a continued, moderate rise in personal insolvency volumes over the next 2 years:

• 13,000 personal insolvencies in 2025–26
• 13,750 personal insolvencies in 2026–27.

Growth is expected across all administration types, supported by gradually improving economic activity, stable inflation, and a low but rising unemployment rate.

Glossary and technical notes

Active personal insolvencies: All personal insolvencies that were undischarged as at 30 June 2025, regardless of when they commenced.

Adult population: As defined by the Australian Bureau of Statistics, this refers to all Australians aged 15 years and older.

Estates: In personal insolvency, an estate refers to the total financial affairs of an individual who has entered into a formal insolvency process. It includes all assets, liabilities, income, and financial obligations that are subject to administration. It can also include joint bankrupt estates, where 2 individuals are declared bankrupt together and their financial affairs are administered jointly.

Australian Securities and Investments Commission (ASIC): ASIC is Australia's corporate, markets, and financial services regulator. It enforces and regulates company and financial services laws to protect consumers, investors, and creditors. ASIC plays a key role in overseeing insolvency practitioners and ensuring the integrity of the corporate insolvency system.

Australian Taxation Office (ATO): The ATO is the principal revenue collection agency of the Australian Government. It administers the taxation and superannuation systems, ensuring compliance and supporting economic and social policy. In the context of personal insolvency, the ATO is often a significant creditor and may initiate bankruptcy proceedings against individuals with outstanding tax debts.

Bankruptcy: A legal process where an individual is declared unable to pay their debts. It typically lasts for 3 years and involves the transfer of certain assets to a trustee for the benefit of creditors.

Business-related personal insolvency: Includes personal insolvencies where the person has traded as a sole trader, including as a contractor, subcontractor or similar, or been involved in a partnership, and/or has been a director/secretary or held a management role in a company. AFSA asks for this information for the last 5 years for bankruptcies and personal insolvency agreements and 2 years for debt agreements.

Company directors or guarantors: Individuals who may be personally liable for company debts if they have provided personal guarantees, received Director Penalty Notices from the ATO for unpaid tax or super obligations, or served as a company director within the preceding 5 years.

COVID-19: Throughout the report, where COVID-19 has been referenced, the following time periods apply (in financial years):

• pre-COVID-19: 2015–16 to 2019–20 inclusive
• COVID-19: 2020–21 to 2021–22 inclusive
• post-COVID-19: 2022–23 to 2024–25 inclusive.

Creditor: A person or organisation to whom money is owed. In insolvency, creditors may receive a portion of what they are owed through the administration of the debtor's estate. Deceased Estate: The estate of a person who has died and had outstanding debts.

Debt Agreement: A formal agreement between a debtor and their creditors to repay a percentage of their debts over time. It is an alternative to bankruptcy and is available to individuals with lower levels of debt and income.

Debtor: A person who owes money to one or more creditors and may be subject to insolvency proceedings if they are unable to repay those debts. In this report, debtor is used for clarity and consistency. While terms like people in debt are more person-centred, debtor is used here as a practical shorthand, not to diminish the individual's experience or identity.

Debtor's Petition: A formal application made by an individual to voluntarily declare themselves bankrupt.

Finance and lending: Includes businesses involved in lending, vehicle finance, investment firms, accounting, and any other financial services.

Insolvency services: Involves debt collection agencies, debt buyers, insolvency firms, debt consolidation, liquidators and restructuring firms.

New personal insolvencies: Refers only to new entrants to the personal insolvency system in any given financial year (i.e. excludes existing personal insolvencies that commenced in previous years).

Official Trustee: The Official Trustee administers bankruptcies and other personal insolvency arrangements where no registered practitioner is appointed.

Personal insolvency: Legal processes that provide relief to individuals who are unable to pay their debts. This includes bankruptcy, debt agreements, and personal insolvency agreements.

Personal Insolvency Agreement: A legally binding agreement between a debtor and creditors to settle debts without becoming bankrupt. It is generally used for more complex financial situations than a debt agreement.

Registered Practitioner: A person or organisation registered with AFSA to administer personal insolvencies. This includes Registered Trustees and Registered Debt Agreement Administrators. Sequestration Order: Court order that makes a person bankrupt, usually following a creditor's petition.

Temporary debt protection: A temporary debt protection provides a 21-day protection period where unsecured creditors can't take enforcement action, such as a sheriff seizing your goods or garnishing your wages. The Big Four banks: Consists of the Commonwealth Bank of Australia, Australia and New Zealand Banking Group Limited (ANZ Bank), Westpac Banking Corporation (Westpac), and National Australia Bank (NAB).

Undischarged: Undischarged insolvencies refer to people who have entered insolvency, but the term of their insolvency has not yet ended.

Endnotes

[1] Personal credit includes all secured and unsecured loans borrowed by households, excluding mortgages. This ratio helps track how personal credit changes over time compared to the overall size of the economy.

[2] Australian Prudential Regulation Authority, 'Quarterly authorised deposit taking institution statistics | APRA', Table 2d, APRA, September 2025.

[3] Australian Securities & Investments Commission, 'Insolvency statistics | ASIC', 5-year average from 2015–16 to 2018–19. Publicly available data prior to 1999 is not available.

[4] AFSA, average personal insolvency volumes from 2014–15 to 2019–20.

[5] More than one cause of personal insolvency can be selected.

[6] Australian Bureau of Statistics, 'National, state and territory population', Reference period: March 2025, Released 18 September 2025. Population statistics are based on the estimated residential population aged 15 or more as of 30 June 2024.

[7] Queensland Treasury, Queensland Budget 2025–26, Budget Paper No. 2.

[8] Australian Bureau of Statistics, Regional Population Methodology (Reference period 2023–24), released 27 March 2025.

[9] A small proportion (6.9%) of insolvencies were recorded with suppressed, overseas, or unknown addresses.

[10] There is also a separate category for all those who were not in remunerated employment at the time of insolvency, which includes volunteers, students and people who were otherwise unemployed.

[11] Other services include a broad range of services such as hairdressing and beauty services, diet and weight management centres, funerals, crematoriums and cemeteries, religious services, car repair and maintenance, machinery repair services, private households employing staff, other personal services.

[12] An asset-to-liability ratio above 100% means total gross assets exceed liabilities. Gross assets include encumbered assets, which may not be available to repay liabilities. For example, a mortgaged property or a car under a secured loan would require the proceeds from its sale to be first allocated to the respective lenders before being applied to other outstanding liabilities.

[13] Financial Counselling Australia, 'Big Increase in Small Business Debt Helpline 2024 case numbers', February 2025.

[14] This reports on the industry the debtor works in (self-reported), not the industry of the business.

[15] Australian Taxation Office, ATO Corporate Plan 2025–26.

[16] Sectors have been manually defined based on services provided by creditors, and do not align to Australian and New Zealand Standard Industrial Classification classes.

[17] Finance and lending sector means businesses involved in lending, vehicle finance, investment firms, accounting, and any other financial services; Real estate, property development and management sector means businesses involved in the sale, management, improvement and construction of land and property; Other banking institutions means banks, including with and without Authorised Deposit-taking Institutions (ADIs), excluding the Big Four banks; Insolvency services sector means debt collection agencies, debt buyers, insolvency firms, debt consolidation, liquidators and restructuring firms.

[18] The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, conducted by Kenneth Hayne AC KC, highlighted the need for better consumer outcomes, enhanced accountability and strong and effective regulators to restore trust in Australia's financial system.

[19] IBISWorld, Debt Collection in Australia - Market Research Report (2015–2030).

[20] Australian Securities and Investments Commission (ASIC), ASIC – Credit Licensee Dataset.

[21] ASIC, 2025, Buy now pay later credit contracts: Credit licensing (INFO 285), ASIC.

[22] As part of the administration of personal insolvency estates, practitioners are required to make payments to AFSA, which in 2023–24 totalled $24.7 million and are included within the broader category of 'Other administration costs'. These payments primarily consist of a government-imposed levy known as the realisation charge (set at 7% of all money received into an estate) and includes interest charges applied to estate funds.

[23] The cost to operate the remainder of the personal insolvency program is $54.6 million. This funding supports the administration of the National Personal Insolvency Index and enables AFSA to deliver its statutory functions, including the roles of the Inspector-General in Bankruptcy (regulating insolvency practitioners) and the Official Receiver (managing public insolvency processes). It also supports key program elements, including compliance and enforcement activities, information and registry, policy reform, trauma-informed support for financially distressed individuals, and the provision of public education and digital information services.