Bankrupts are getting older and are more heavily indebted, according to the latest insolvency data.
Insolvency and Trustee Service Australia released its biennial profile of debtors yesterday, based on the statements of affairs completed by the 23,125 people who went into bankruptcy in 2011.
The average bankrupt is male, aged between 35 and 54 years, single and without dependents. He is earning less than $30,000 and has unsecured debts of more than $20,000.
This is his first bankruptcy (only 16 per cent of bankrupts in 2011 have been bankrupt more than once). He is likely to live in the Northern Territory, the Australian Capital Territory or Western Australia – the territories and the state with the highest ratio of bankrupts per head of population.
The age of bankrupts has increased over the past decade. The proportion of bankrupts aged 18 to 39 has fallen from 52 per cent in 2003 to 37 per cent in the latest survey.
The proportion of bankrupts over 60 has increased from seven per cent in 2003 to 13 per cent in the latest survey.
The causes of non-business related bankruptcy have remained consistent over the past decade. Unemployment or loss of income is the biggest cause (accounting for 34 per cent of bankruptcies), followed by excessive use of credit facilities (22 per cent) and relationship breakdown (12 per cent).
The biggest cause of business-related bankruptcy is economic conditions, accounting for 42 per cent of failures. Only five per cent of people affected by business-related bankruptcies said their failure was due to their lack of business ability.
The majority of bankrupts are below-average income earners. Fifty-two per cent earn less than $30,000 a year and 78 per cent earn less than $50,000.
Given their low incomes, a surprising finding is that 48 per cent of bankrupts have unsecured debt of more than $50,000 and 27 per cent have unsecured debt of more than $100,000. The number of highly indebted bankrupts has risen sharply over the past decade; those with unsecured debt of more than $100,000 constituted 11 per cent of bankrupts in 2003.
Banks accounted for 33 per cent of the debts owed by bankrupts by number, and 44 per cent by value.
Credit card debt was the single biggest type of debt owed. There was a correlation between the size of the credit card debt and the number of cards the bankrupt held.
Thirty-eight per cent of debts (by number) were owed to creditors other than banks, mutuals, finance companies, utilities and the Australian Taxation Office. ITSA said "others" would include trade creditors, store accounts, professional fees, medical bills, school fees and family loans.
Sixty-four per cent of bankrupts had no realisable assets. Another 24 per cent had realisable assets worth less than $20,000. Only 16 per cent were owners or purchasers of real estate.
The ITSA data shows similar trends for people entering debt agreements and personal insolvency agreements. They are predominantly male and on below average incomes, they are getting older and their debts are growing.
The causes of their financial difficulties are very similar to those of bankrupts.
Australia's insolvency rate was the lowest among the other countries surveyed by ITSA. In 2011, 0.14 per cent of Australians became bankrupt, entered into a debt agreement or a personal insolvency agreement.
The ratio of personal insolvency was 0.16 per cent in New Zealand, 0.22 per cent in England and Wales, 0.36 per cent in Canada and 0.45 per cent in the United States.