Low-income, low-asset debtors in personal insolvency: An empirical study

Australia's cost-of-living crisis has driven widespread indebtedness, particularly among low-income earners. Buy-now-pay-later services such as Afterpay have reshaped consumer credit, creating new pathways into debt. In response, the Australian Government proposed a new Minimal Asset Procedure (MAP) in 2024 to help individuals struggling with severe financial hardship. The MAP targets people with debts below $50,000, assets below $10,000, and low incomes, offering faster discharge from insolvency – one year instead of three – with fewer restrictions than standard bankruptcy.

However, the potential impact of this new procedure remains unclear. Will it genuinely reduce financial hardship for vulnerable groups such as social security recipients and single parents? How will it affect creditors and lending practices? What role has buy-now-pay-later played in driving people into insolvency? This project provides the empirical evidence needed to answer these questions.

The research will analyse a custom dataset from the Australian Financial Security Authority (AFSA), the regulator of personal insolvencies. The dataset covers all individuals who entered personal insolvency between July 2018 and June 2024 with debts below $50,000. Using this data, the project will identify the demographic and financial characteristics of those most likely to use the MAP, examine the types of debts they carry, and assess whether the MAP would reduce financial hardship for vulnerable cohorts. The research will also evaluate the procedure's impact on creditors – particularly banks, buy-now-pay-later providers, and payday lenders – and on returns from existing debt agreements.

The project will produce peer-reviewed academic articles, policy briefings and engagement pieces for policymakers, regulators and the public. Findings will be communicated to the Treasury, AFSA and relevant parliamentary inquiries, and presented at domestic and international conferences.

MDAP's expertise is essential to this collaboration. MDAP researchers will help identify what can be learned from existing data and what additional data is needed. They will analyse and interpret the dataset rigorously, help formulate effective data requests to AFSA, and co-author peer-reviewed articles describing the analytical methods and findings. This partnership will enable robust, high-quality empirical research that informs policy decisions affecting vulnerable Australians.