PIR newsletter – January 2025

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State of the Personal Insolvency System Report 2023–24

AFSA's State of the Personal Insolvency System Report, released in late 2024, reveals that debtors with small savings buffers are the most vulnerable to insolvency through challenging economic conditions and personal insolvencies continuing to rise. ...

AFSA's State of the Personal Insolvency System Report, released in late 2024, reveals that debtors with small savings buffers are the most vulnerable to insolvency through challenging economic conditions and personal insolvencies continuing to rise.

The report shows that AFSA is expecting annual personal insolvency volumes to rise moderately over the next 2 years. The report highlights that ongoing cost-of-living pressures have had an uneven effect on Australian households.

The proportion of debtors with less than $50,000 in liabilities continues to represent a large part of the personal insolvency system, with 49% of debtors having less than $50,000 in liabilities and just over a quarter of debtors had over $100,000 in liabilities.

Key findings:

  • There were 11,644 new personal insolvencies in 2023–24, an increase of 17.3% from the previous year. This remains well below the 10-year average of 21,252.
  • AFSA has forecast personal insolvencies to rise by 15% to 13,400 in 2024–25 and by a further 12% to 14,950 in 2025–26.
  • While just over a quarter (25.1%) of personal insolvencies were business-related, they accounted for 75% of the personal insolvency system’s total debt ($17.3 billion), with a total value of $13.2 billion in liabilities.
  • Debtors with low liabilities continue to represent a significant proportion of new personal insolvencies in 2023–24, with 49% of debtors having liabilities of less than $50,000.

Find out more and read the full State of Personal Insolvency Report.

AFSA's Regulatory Action Statement 2024–25

AFSA's Regulatory Action Statement 2024–25 has been released and outlines our focus in addressing conduct in the areas of significant harm, using our regulatory toolkit of education, compliance, investigation and enforcement. ...

AFSA's Regulatory Action Statement 2024–25 has been released and outlines our focus in addressing conduct in the areas of significant harm, using our regulatory toolkit of education, compliance, investigation and enforcement.

Our priority focus areas include harm caused to individuals experiencing hardship, such as:

  • abusive financial and coercive control of individuals within domestic and family relationships through misuse of Australia's credit system
  • failure to inform debtors of options to mitigate hardship.

Practices and advice that results in disadvantage, such as:

  • charging excessive or unnecessary fees
  • delaying access to personal insolvency options due to the charging of upfront fees
  • administration of debt agreements and personal insolvency agreements resulting in financial or other harm to creditors and debtors.

We are committed to taking action to deter fraudulent practices. This includes where debtors and advisors engage in activities with the intent to defraud creditors.

We encourage you to use our Reporting a tip-off form or reach out via info@afsa.gov.au if you're seeing untrustworthy advice.

Vulnerability Strategy update

Vulnerability is one of AFSA's enduring regulatory priorities. It has also been identified in the Regulatory Action Statement 2024–25, focusing on harms caused to individuals experiencing hardship. ...

Vulnerability is one of AFSA's enduring regulatory priorities. It has also been identified in the Regulatory Action Statement 2024–25, focusing on harms caused to individuals experiencing hardship.

AFSA is revising its approach to vulnerability to ensure we are aligned with community and government expectations of regulatory stewardship – particularly by being human-centered and trauma informed.

A new Vulnerability Strategy and Action Plan 2025–28 is being developed, with priority actions identified in consultation with key stakeholders from the financial counselling and consumer support sectors. Broader consultation with industry, including practitioners and creditors will occur over the coming months. We encourage you to provide feedback and ideas to ensure that actions are practical, realistic and make a difference.

The updated strategy and action plan will provide clarity on how AFSA defines vulnerability, high level objectives to progress over the next 3 years, and guiding principles to underpin the achievement of those objectives.

Untrustworthy advice – report it if you see it

Untrustworthy advice is a significant harm in the credit system, which is why it is a key focus of AFSA's Regulatory Action Statement 2024–25. ...

Untrustworthy advice is a significant harm in the credit system, which is why it is a key focus of AFSA's Regulatory Action Statement 2024–25.

We strive to be an intelligence-led, harms-based regulator taking a whole-of-system view. In our work to establish a holistic view of what harms exist across the credit system, we have interviewed people including practitioners, creditors and financial counsellors.

We've learned the likely scale of untrustworthy advice is bigger than we expected, with the harms impacting people who can least afford the costs, delays and distress associated with untrustworthy advice. Untrustworthy advice doesn't just impact debtors. It negatively affects creditors as well.

Examples of the untrustworthy practices we're targeting are:

  • excessive fees and practitioner remuneration
  • delaying entry to the personal insolvency system
  • engaging in activities with the intent to defraud creditors
  • deficient administration of personal insolvency agreements and registered debt agreements.

As stewards of the Australian credit ecosystem, we encourage you to use our Reporting a tip-off form or reach out via info@afsa.gov.au if you’re seeing untrustworthy advice.

Bankruptcy forms processing times

Changes to the Bankruptcy Act in November 2023 improved clarity on discharge dates. They also introduced a new provision. It requires the Official Receiver to decide on each Statement of Affairs (SoA) within 14 days of receipt. If the Official Receiver decides to refuse the SoA, a person now has at least 14 days to file an updated SoA. ...

Changes to the Bankruptcy Act in November 2023 improved clarity on discharge dates. They also introduced a new provision. It requires the Official Receiver to decide on each Statement of Affairs (SoA) within 14 days of receipt. If the Official Receiver decides to refuse the SoA, a person now has at least 14 days to file an updated SoA.

Each debtor’s petition and SoA contain individualised information. The Official Receiver must consider the information and decide on each SoA. If the Official Receiver refuses an initial SoA, the person has 14 days to provide an updated version. There are no limits on the number of times a person can provide an updated SoA to the Official Receiver.

The Act does not set a timeframe for a decision on a debtor's petition however the Official Receiver must consider various factors which includes the adequacy of the SoA in deciding on the petition. If the Official Receiver finds the SoA inadequate, it may delay the decision on the petition.

Processing timeframes and notification

The Official Receiver assesses 91% of debtors' petitions within 3 days and 96% within 5 days. This is well within the 14-day legislated timeframe for an SoA decision. Once the Official Receiver decides, they will notify the debtor, the bankrupt, and their trustee via a decision outcome letter.

Urgent and/or time-sensitive applications

You can contact the Official Receiver about a time-sensitive issue with a debtor petition or SoA. Call the AFSA Service Centre at 1300 364 785. This service is available to debtors, people going through bankruptcy, and practitioners.

If time allows, email the Official Receiver at registry@afsa.gov.au for urgent matters.

AFSA hosts successful Personal Insolvency Forum

Our Chief Executive Tim Beresford hosted another successful Personal Insolvency Forum in late October 2024. The Forum discussed untrustworthy advice, personal insolvency agreements and debt agreements. ...

Our Chief Executive Tim Beresford hosted another successful Personal Insolvency Forum in late October 2024. The Forum discussed untrustworthy advice, personal insolvency agreements and debt agreements.

During the Forum, we heard:

  • How untrustworthy advice and practices can cause significant financial harm to individuals and the credit system.
    • There is good and bad behaviour in both the regulated and unregulated communities and there is more than one type of unsuitable behaviour.
    • There is an opportunity for AFSA to be clearer about what trustworthy advice looks like.
  • Personal insolvency agreements (Part X) may be an underused or misused personal insolvency option due to debtor comfort with creditors using Part X.
    • This includes creditor perceptions and understanding of this option, and/or associated costs versus benefits.
  • In response to AFSA's vulnerability focus on debt agreements, it’s important AFSA achieves a balance between returns to creditors and affordable debt agreements for individuals.
    • An alternative insolvency option may be a better option for some debtors.

Thanks to all participants for their positive and open engagement, insightful reflections and advice. There is more work to be done and look forward to working together to continue our shared stewardship of the personal insolvency system.

Indexed amounts update

The Australian Bureau of Statistics has released the Consumer Price Index (CPI) for the September quarter 2024. Some dollar amounts in bankruptcy law are indexed to these rates. The updates are available at Indexed amounts. ...

The Australian Bureau of Statistics has released the Consumer Price Index (CPI) for the September quarter 2024. Some dollar amounts in bankruptcy law are indexed to these rates. The updates are available at Indexed amounts.