Who's Actually Going Bankrupt in Australia Right Now? The AFSA Data Behind a Rising Trend

Who's Actually Going Bankrupt in Australia Right Now? The AFSA Data Behind a Rising Trend

AFSA is forecasting 13,000 personal insolvencies for FY26, rising to 13,750 in FY27, with the most recent quarter already up 6.2% on the year before. The regulator's own demographic data shows renters, men in their thirties and early forties, and people working in trades, labour-intensive roles and construction are all overrepresented in that trend. This isn't the failed-businessman-in-a-suit picture most people carry — it's a sole trader or tradie whose client didn't pay, whose head contractor collapsed, or who's been servicing debt on cost-of-living pressure that has nothing to do with poor decisions.

Once someone is made bankrupt, the standard period runs three years from the date the bankruptcy took effect under section 149 of the Bankruptcy Act 1966 (Cth) — extendable to five or eight years under section 149A where the trustee objects, typically for non-disclosure or non-cooperation.

The numbers, and who's carrying them

Cost-of-living pressure explains part of the rise on its own — headline inflation sat at 3.2% and underlying inflation at 3% through the back half of last year, pushing households under pressure to lean harder on personal loans and credit cards just to cover short-term gaps. But the demographic skew points to something more specific:

• Renters are overrepresented relative to homeowners in the personal insolvency population.
• Men in their thirties and early forties are overrepresented relative to the general working population.
• Trades, labour-intensive roles and construction-related jobs are overrepresented more than any other occupational group.

That last point connects directly to the state of the construction industry — 3,472 companies collapsed in FY26 alone, and every one of those collapses puts subcontractors, sole traders and labourers who worked in and around them at direct personal risk. A sole trader has, in most cases, no corporate structure between the ABN and the mortgage: an unpaid invoice or a collapsed head contractor lands straight on a personal account, a personal credit card, or a personal guarantee signed years earlier.

Why this group is overrepresented and underserved

There's no company collapse making headlines to force a sole trader's situation into the open the way a corporate insolvency does. The debt accumulates quietly — one unpaid client, one bad job, a credit card carrying what wages used to cover — until it's large enough that bankruptcy or a Part X arrangement becomes the only formal option left. By the time that point is reached, the earlier and cheaper alternatives — a payment arrangement, informal renegotiation, sometimes an ATO compromise — have often already closed.

The trend line here isn't a temporary spike. AFSA's own forecast has it climbing through FY27, not levelling off.

Common questions

Is personal bankruptcy actually rising in Australia, or is this a temporary blip?

It's a sustained trend, not a blip. AFSA forecasts 13,000 personal insolvencies in FY26 and 13,750 in FY27 — an increase across both years, not a single-quarter spike. The most recent quarter was already up 6.2% on the same quarter the year before.

Why are tradies and construction workers overrepresented in bankruptcy statistics?

Partly because the businesses around them are failing at a disproportionate rate — construction accounted for 24.5% of all company insolvencies in FY26 — and partly because sole traders in these industries typically have no corporate structure separating personal finances from business risk. An unpaid invoice or a collapsed client becomes a personal debt immediately, not a company one.

Does bankruptcy always last three years?

The standard period is three years from the date it takes effect, under section 149 of the Bankruptcy Act 1966. It can be extended to five or eight years under section 149A if the trustee lodges an objection, typically for non-disclosure of assets or income, or failure to cooperate with the trustee.

Is bankruptcy the only option for a sole trader with unpayable personal debt?

No. A Part X (Personal Insolvency) Agreement can let you negotiate a binding arrangement with creditors without becoming bankrupt, and in some cases an informal payment arrangement or an ATO compromise proposal resolves the position without any formal insolvency event at all. Which one fits depends on how much is owed, to whom, and how much genuine capacity to pay exists.

What should a tradie do if they're behind on payments and a client owes them money they haven't received?

Get an independent read on the actual position before assuming bankruptcy is the only door. Sole traders often have more options than they realise — but those options close in the same order the doors close for company directors: the earlier someone looks at it, the more of them are still open.

Where I fit

I'm not a bankruptcy trustee — I coordinate. I'll look at your actual numbers, tell you plainly whether bankruptcy, a Part X arrangement, or an informal negotiation fits your position, and connect you with the right people to act on it. In 38 years I've had this conversation with people in every one of these situations, and the ones who come out of it best are the ones who spoke up earliest.

If you're a sole trader or tradie carrying debt that's stopped making sense, book a phone or video time at resolvency.com.au/book or call 0457 099 099.

General information only — not financial, legal or tax advice. Everyone's position is different, so get advice specific to yours before you act.

Related service: Bankruptcy: Annul or Avoid — see how I can help.