Rise in middle-class bankrupts

PROFESSIONALS and people on high incomes are declaring bankruptcy faster than ever in Australia.

According to a study, bankruptcies have risen by more than a third in the past four years.

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

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

The report 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.

An earlier study 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.

One of the biggest findings was that more and more of the middle class are being claimed by bankruptcy.

The report says that a major cause of rises in bankruptcy among the middle class has been due to unsustainable home loans and excessive use of credit.

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SMH article excerpts