Bankruptcy, Social Security and Long Term Poverty : Results from a Survey of Financial Counsellors and Consumer Solicitors

Recent scholarship has identified a shift in the demographic profile of Australians declaring bankruptcy. In the context of a marked increase in overall rates of personal insolvency, bankruptcy has become increasingly prevalent among ‘middle class' Australians. Against this background, the authors conducted a survey of financial counsellors, consumer solicitors and other community workers who specialise in assisting people in financial hardship. This survey asked for the respondents' views on Australia's personal insolvency system and its practical impact on the lives of people in financial distress. The results demonstrate that, for many such people, bankruptcy offers tangible benefits, including relief from debtor harassment and immediate improvements in health and wellbeing. At the same time, the survey revealed that many respondents view bankruptcy as an inadequate response to the underlying causes of financial hardship. These causes, which can include mental illness, domestic violence, poor financial literacy and most frequently, insufficient income, often persist after bankruptcy. The results of the survey suggest that, for many bankrupts, the promise of a ‘fresh start' turns out to be illusory. They also suggest that there is a nexus between bankruptcy, the social security system and entrenched poverty in Australia