Responding to consumers with overwhelming debt and improving their financial wellbeing: a mixed methods study of debtor and practitioner perspectives on bankruptcy and other debt management options

This thesis explores how the use of a debt management option affects Australian consumers who are burdened with overwhelming debt. A state of overwhelming debt causes financial and emotional stress for debtors and can also adversely affect the debtor’s family and others. Conversely, helping a debtor to recover has ongoing positive effects for the debtor, their family and the broader community. Recognising this, Australia – like many other jurisdictions – provides several options for such consumers through insolvency and other laws. Thousands of people use the common debt management options each year, but there is little information about how they experience these options and whether they are able to recover from their debt problems. Although some data are available from other jurisdictions, this information is not readily transferable to the Australian situation. This absence of data makes it difficult to know whether the current options are working as intended, and also makes it hard to have well-informed debates about proposals for law reform. In this thesis, the experiences of debtors who have used one of three debt management options (financial difficulty assistance, bankruptcy or a debt agreement) to deal with their consumer debts are explored through quantitative and qualitative data. The experiences of practitioners who work in the consumer debt field are also incorporated, providing a different perspective on the topic. In a novel approach compared with previous studies, the thesis also uses a financial wellbeing scale to examine debtor outcomes. In general, this thesis finds that many debtors experience positive outcomes, both financially and emotionally, from using a debt management option. It also finds improvements in average financial wellbeing scores associated with each of the three options. Practitioners also recognise the potential for each of these options to offer positive outcomes. However, given that the features of the three options can be quit