The number of struggling Australians turning to debt agreements has hit a record high, according to government statistics.
Personal insolvency data released by the Australian Financial Security Authority (AFSA) reveal that debt agreements increased nationally by 1.9% in 2014-15, compared to 2013-14. According to the AFSA, debt agreements have now reached the highest level on record. In fact, they have reached new records each year since 2011–12.
On a state-by-state basis, New South Wales and Tasmania were the only two states to record a decrease in households turning to debt agreements, falling by 3.3% and 0.7% respectively.
The Northern Territory experienced the biggest surge, with those turning to debt agreements increasing by a massive 31.8%. This was followed by Western Australia (10.8%), ACT (8.5%), South Australia (6.6%), Victoria (4.6%) and finally Queensland (1.7%).
Interestingly however, bankruptcies fell by 7.7% nationally over 2014-15. Bankruptcies fell in every state, except the Northern Territory and South Australia, where households who declared bankruptcy increased by 19.3% and 3.5% respectively over the year.
The largest drops in bankruptcy occurred in New South Wales (-12.5%), followed by Tasmania (-10%) and Victoria (-7.8%).
The increase in households turning to debt agreements over bankruptcy can be explained due to reforms to the Bankruptcy Act
in 2007 in the form of the Bankruptcy Legislation Amendment (Debt Agreements) Act 2007
, which aimed to improve the operation of the debt agreement regime.
For many Australians, debt agreements can provide better outcomes for their financial circumstances, and may allow them the chance to save their home.