Rise in middle-class bankrupts in Australia

Rise in middle-class bankrupts
DANIELLA MILETIC
May 24, 2010
PROFESSIONALS and people on high incomes are declaring bankruptcy faster than ever in Australia, according to a study that reveals bankruptcies have risen by more than a third in the past four years.

The report contradicts the common belief that most people who file for bankruptcy are either chronically poor with no other options or the hugely wealthy avoiding debt obligations.

Bankruptcy is increasingly becoming a ''middle class phenomenon'' in Australia, says the report from the University of Melbourne Centre for Corporate Law and Securities Regulation.

Professor Ian Ramsay, an author of the report, which will be published later this year, said the number of personal bankruptcy filings jumped by 6 per cent in 2008-09, after rising steadily over the past four years. There were 27,520 in 2008-09, an increase of 34 per cent since 2004-05, when there were 20,501 cases of bankruptcy. In 2009 the number of personal insolvency cases (which mainly involves bankruptcy but includes debt agreements) shot up to 36,487.

In an earlier study Professor Ramsay and his co-author, Cameron Sim, found that since 1990 there had been a 300 per cent increase in the number of personal insolvencies in Australia, far exceeding population growth and indicating a strong middle-class presence.

In their recent report Personal Insolvency in Australia, they have focused on middle class bankruptcy profiles. ''There are so many urban myths about bankrupts … students skipping on credit card bills, wealthy hiding assets who prefer to go into bankruptcy,'' Professor Ramsay said. ''They exist but are not indicative of the typical bankrupt.

''One of the biggest findings was that more and more of the middle class are being claimed by bankruptcy and, to us, it seems a social problem that has escaped notice.''

Because the phenomenon of the middle class bankrupt is so unheard of, Professor Ramsay said that Australians were largely unaware of the social costs to those affected, which includes 

• tarnished credit ratings, 
• difficulty in the workforce, 
• cost to personal relationships and 
• the still-prevalent stigma attached to becoming bankrupt.

He said insolvents are increasingly from higher-status occupations, have higher levels of personal and household income, and have rising asset and property ownership levels.

A major cause of rises in bankruptcy among the middle class, said Professor Ramsay, has been due to unsustainable home loans. Excessive use of credit as a cause of bankruptcy has jumped significantly in recent years, he added.



Source: The Sydney Morning Herald

http://www.brisbanetimes.com.au/business/rise-in-middleclass-bankrupts-20100523-w41p.html