The 2023 Parliamentary Joint Committee Report on Corporate Insolvency called for the collection and analysis of data in advance of any law reform. The Committee had regard to a 2019 working paper of the IMF, The Use of Data in Assessing and Designing Insolvency Systems, which warned of legislating “in the dark”, risking law reforms that are inefficient or even detrimental.
A further 2025 IMF working paper – Personal Insolvency and Data Collection Systems[1] – agrees, explaining the necessary design of data collection systems both to assist in defining clear objectives for personal insolvency and to allow the evaluation of personal insolvency systems and their designs and reforms. Data can also be relevant in the analysis of consumer behaviour, financial literacy, and social and economic trends.
This 2025 IMF paper looks only at personal insolvency, claiming that data collection systems for commercial or corporate insolvency cannot simply be extended to cover personal insolvency. But while the paper focuses on the collection of the debtor’s demographics, assets and liabilities, and other socio-economic information, it also assesses the personal insolvency litigation and administration processes, which are largely common with corporate.
What we need
In that respect, two areas of insolvency data are needed in Australia in particular.
One, data that measures the effectiveness and efficiency of the insolvency regimes; and two, small business data whether that business be operating through a company, an individual, or both.
One, measuring the effectiveness and efficiency of the insolvency regime
In cases where substantial assets are available, the 2025 IMF paper says that careful tracking of the costs of administration of estates is advisable to avoid inefficiency and unfairness.
What it terms “deeply depressed distributions to creditors” might reveal that administration and asset recovery procedures are unduly complex and should be simplified; or that too much value is being diverted to charges, costs and remuneration.
That is, it is all very well to see the success of a practitioner’s litigation claim, but if the costs of recovery or government charges are going to exceed moneys brought in, such that creditors receive nothing, some legislative changes may need to be made.
The difficulty is that we don’t know much from the industry as to what its net payments to creditors are following litigation or other recovery processes.
AFSA data does show that litigation claims produce only about 5% of realisations but that is a very broad figure. Trustee remuneration lies at about 27% of realisations.
We don’t know the comparable percentages in corporate, though we do know from the 2023 PJC Report that much of the recovered money in preference claims is absorbed by liquidators’ costs and fees, with limited if any returns to creditors [13.11]; and from case law that litigation recoveries are, as a reality, accepted to be fully applied to unmet remuneration: In the matter of Cardinal Group Pty Limited (in liq) [2015] NSWSC 1761, citing Hall v Poolman [2009] NSWCA 64.
While these may be legitimate outcomes in the particular circumstances, the litigation purposes of increasing returns payable to creditors are not being met.
An option would be for the law to require the practitioner to clearly account for the financial outcome of litigation proceedings, that is, the amount of the liquidator’s remuneration and legal expenses, and what dividend, if any, was paid to unsecured creditors.
Justice Palmer in effect sought that information from the liquidators during the “huge piece of litigation” in Hall v Poolman, where, as he noted, the beneficiaries were to be “a litigation funder, the Liquidators and their lawyers, not the creditors”: Hall and Ors v Poolman and Ors [2007] NSWSC 1330 (23 November 2007) at [17].
One issue raised by the IMF is perhaps not relevant in Australia, being upfront government, legal or trustee fees. This should not be an issue in Australian bankruptcies given the access to the Official Trustee. Australia once toyed with a $200 filing fee for a debtor to go bankrupt, but the politicians reacted badly, and it did not proceed. This is despite the £680 [2025] fee in the UK,[2] and the high ‘fee’ in Australian corporate insolvency.[3]
Two, data collection systems for both personal and corporate
More importantly, and despite the views in the 2025 IMF paper, there needs to be a connection drawn between data in personal and corporate insolvency.
As an OECD paper explains, [65], personal insolvency regimes are often more relevant for entrepreneurs and small businesses than corporate.
“… the corporate vs non-corporate distinction in assets and liabilities is often blurred for small firms, either because lenders require personal guarantees or security – e.g. a second mortgage on the owner’s home – or because prior to incorporating and obtaining limited liability protection, entrepreneurs typically use personal finances ….
Efficient personal insolvency systems share many of the same goals and features of an efficient corporate insolvency regime, such as the need for early warning mechanisms and informal work-outs …”.
With the Minister for Small Business reporting that small business comprises 70% sole traders, more data around the corporate-personal connections is required.[4]
With the transfer of personal insolvency to Treasury, that data may improve but the real opportunity was lost when the 2010 recommendation for joint statistics was rejected by the then government.[5]
As much as we get from AFSA are the monthly numbers of those who entered insolvency with a business connection, that is, X number of bankrupts who
“were also involved in a business … This covers sole traders, people in partnerships or directors in companies”.
This data is too general to be useful.
Academic, economic and parliamentary
Access to AFSA data is available, and for example was used for a longitudinal study of repeat bankrupts, claimed to represent “an important step in the development of a high-quality longitudinal data system to facilitate the extension of data models”.[8] The outcome showed repeat bankruptcies to occur more among women not in business.
ASIC charges for copies of its records for research purposes.
The regulators’ reports are useful, in particular the two issued by ASIC on Part 5.3B of the Corporations Act, the second being on 27 June 2025, which extracts numbers, creditors, returns and time taken. AFSA’s 2020 report on trustee remuneration was useful in showing the extent of unfunded matters. The Inspector-General’s analyses of bankrupts, trustee firms, secured creditors and limited assets are useful.
The ATO offers little, whereas payments in response to director penalty notices would be one example of useful information.
Academic analyses also include useful data including Dr Jason Harris’ Promoting an Optimal Corporate Rescue Culture in Australia on Part 5.3A, and Dr Amanda Bull’s Small to Medium Enterprises: Destined to Fail or Supported to Thrive? on Part 5.3B.
Parliamentary Committee reports have the advantage of being able to call for data and other evidence, and in its absence can draw conclusions from evidence given. The limited purpose of preference claims explained in the 2023 PJC Report is one example.
Economics Committees can also necessarily take a broader economics perspective beyond the law. The 2023 PJC inquiry took evidence from the Productivity Commission (PC) on the economics of insolvency, in particular that rates of business failure can be an indicator of a healthy economy, that
“while there’s an element of pain associated with financial distress, sometimes business exit is an important way for us [to] get economic growth through innovation and different business models …”.
Reserve Bank and PC reports can provide information about the comparative rates of entries and exits in the economy, and in particular industries and regions.
Insolvency’s overall economic context – 29,000 corporate insolvencies in the period from 2022-2024, compared with 850,000 new businesses in that time – is important.
Comment
While personal insolvency remains a significant legal and societal feature, it may not warrant the in-depth analysis called for in the 2025 IMF paper, or at least alone, and in Australia.
Implementing the IMF 2025 paper’s recommended data collection processes would be a luxury if confined to personal insolvency; it would be a larger but more useful exercise if joined with corporate insolvency. The socio-economics of debtors does already receive a good level of attention – the causes of personal insolvency, and the nature of the debtor’s circumstances and assets.
As to what data we have, AFSA’s monthly efforts on personal insolvency numbers are rather routine. As the 2019 IMF paper says – this is insolvency data collected
“at a very high level of generality. The purpose of these statistics is intended to give a broad-brush view on the financial health of the economy. The data on gross numbers of liquidations or debt restructurings does not, however, provide insight on how the legal and institutional framework for insolvency is performing”.
ASIC’s statistics reports are comparable.
The Inspector-General’s regular reports are better, for example as to trends, asset levels, creditor claims and changes in credit markets: AFSA Chief Executive speech at the 2025 Australian Credit Forum | Australian Financial Security Authority
There is little data provided from the industry itself.
In my earlier comment, I refer to a 1997 article by Keith Bennetts[6] whose main point is the same as that made by the IMF, still very relevant today, that objective and empirical data is required in order to support efficient and effective insolvency law reform. This is as opposed to reform based on
“unsystematic data, such as bureaucratic value-judgments, anecdotal data or information based on expert opinion”, pursued by bureaucrats with their “whiteboards”.
The usual political response is that the cost of such programs is too high. But as the IMF authors say,
“the cost of not developing these systems is far higher than the cost of creating them”.
None of the existing disparate databases discussed really address the continuing danger of legislating in the dark, producing laws that may or may not be efficient and effective, and without us knowing one way or the other.
The fall-back sources of information for law reform are value-judgments, anecdotes and industry experience and views, without empirical backing.
Ultimately AI will produce the data that humans can’t.
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[1] José M. Garrido, Jason Kilborn, and Anjum Rosha. “Personal Insolvency and Data Collection Systems”, IMF Working Papers 2025, 124 (2025), accessed June 24, 2025, https://doi.org/10.5089/9798229013703.001
[2] Becoming bankrupt: Applying to become bankrupt – GOV.UK
[3] See How low can we go – funding the insolvencies of assetless estates – Murrays Legal
[4] Interview with Patricia Karvelas, Afternoon Briefing, ABC | Treasury Ministers
[5] 2010 Senate Committee Report.
[6] Bankruptcy Reform: The Significance of Systematic Data and Consultative Processes in Developing Our Bankruptcy Law (1997) Flinders Journal of Law Reform 199, Keith Bennetts, in my Insolvency law reform – and income contributions – Murrays Legal.
[8] Predicting repeat consumer bankruptcy: A survival analysis of business-related repeat filings in Australia 2007–2021, Robinson, Smith, Wicht, Rice, McCosker & McBride (2024) 33(2) International Insolvency Review 159.
