Barely being able to afford the cost of living is a terrible daily reality for millions of Australians. But when a financially precarious existence slips into mounting debt, things can go from bad to worse in a hurry.
The average Australian household was carrying somewhere around $300,000 in debt as of June 2025, most of it credit card and mortgage debt. But other forms of debt were also in the mix, including outstanding balances on buy now, pay later (BNPL) products, personal loans, and payday loans. A lot of this eventually gets paid off, but when it doesn’t, people and businesses can be forced to go bankrupt, to their long-term detriment.
A recent report from Financial Counselling Australia (FCA) – Who’s Making Australians Bankrupt? A follow-up report: six years on – reveals that more and more businesses are compelling debtors to file for bankruptcy, especially in sectors where consumer protections are weak and both hardship relief and dispute resolution are hard to come by.
In the six years since the FCA released its initial report, better data has become available, and what it shows may come as a surprise to many Australians.
The report draws on the 6700 creditor’s petitions (forced bankruptcy applications) filed in the Federal Court for the financial years 2021–22 to 2024–25. It reveals that most of the forced bankruptcies were at the hands of a small number of creditor types.
One of those is the Australian Tax Office, the creditor that drove the most bankruptcies over the reporting period (13% of the subjects of ATO petitions). But the ATO was followed closely by strata bodies and non-bank lenders, which each forced 12% of the subjects of their creditor petitions to file for bankruptcy. Strata-related bankruptcies went up 33% nationally since 2021–22.
Without stronger safeguards and modernised laws, Australians risk losing their homes and livelihoods unnecessarily over relatively modest debts
FCA CEO Dr Domenique Meyrick
Since FCA’s 2019 report, the number of creditor petitions that led to bankruptcy has tripled, “with serious and potentially avoidable consequences” for the people involved, FCA says. In the financial year 2024–25, four out of ten creditor petitions resulted in forced bankruptcy, often over debts as small as $10,000.
In previous years, debt collectors and major banks drove the bulk of the bankruptcies. Both sectors have mandatory consumer protections.
“Forced bankruptcy is one of the most serious tools available to creditors and should only be used as a genuine last resort,” says FCA CEO Dr Domenique Meyrick.
Since FCA’s 2019 report, the number of creditor petitions that led to bankruptcy has tripled.
“Our report shows that without stronger safeguards and modernised laws, Australians risk losing their homes and livelihoods unnecessarily over relatively modest debts.”
FCA is calling on the federal government to raise the bankruptcy threshold to $20,000 and to expand hardship protections and regulatory oversight across high-risk sectors, including strata, motor vehicle finance, small business lending, government, and education.
Coerced business debt – which can lead to bankruptcy – is another issue raising concerns among consumer advocates. A recent report from Monash University and the Redfern Legal Centre revealed that women are most often the victims of this form of financial abuse, belatedly discovering that their ex-partner had secretly involved them in their business affairs and made them responsible for debts they had nothing to do with incurring.
In many cases, affected women only find out about the debt after being contacted by the ATO.
We need to treat coerced business debt as a serious form of economic abuse and design safeguards to reflect that reality
Associate professor Vivien Chen, Monash Business School
“These victim-survivors often can’t afford legal representation, and the business structures they’re trapped in are costly and complex to unravel,” says Redfern Legal Centre’s Jasmine Opdam, adding that business creditors “are not legally required to have hardship policies”.
Monash Business School’s associate professor Vivien Chen says the research “exposes a significant policy blind spot”.
“While Australia has made progress in addressing financial abuse through consumer credit reforms, there has been little recognition of how company and tax systems can also be exploited to cause harm,” Chen says. “We need to treat coerced business debt as a serious form of economic abuse and design safeguards to reflect that reality.”
Andy Kollmorgen is the Investigations editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC), and at the Australian Financial Review. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn
Andy Kollmorgen is the Investigations editor at CHOICE. He reports on a wide range of issues in the consumer marketplace, with a focus on financial harm to vulnerable people at the hands of corporations and businesses. Prior to CHOICE, Andy worked at the Australian Securities and Investments Commission (ASIC), and at the Australian Financial Review. Andy is a former member of the NSW Fair Trading Advisory Council. He has a Bachelor of Arts in English from New York University. LinkedIn
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