There have been 128 bankruptcy actions by schools since 2021, of which 45 took place last financial year.
The top five schools were all in Victoria, and led by the 13 initiated by the Melbourne-based Sirius College last year, followed by Oakleigh Grammar, Overnewton Anglican Community College, Trinity Grammar and Wesley College.
Actions by strata bodies against residents have soared. They accounted for just 2 per cent of bankruptcy actions in 2020-21 but last year that had reached 12 per cent.
Financial Counselling Australia found strata bodies in NSW, Victoria and the ACT are increasingly aggressive in trying to recoup fees from residents. Half of all forced bankruptcies in the ACT last year were due to strata debt, a level the FCA labelled as “seriously disproportionate”.
In NSW, 16 per cent of all bankruptcies last year were due to strata body actions, with 152 people directly affected.
FCA chief executive officer Domenique Meyrick said changes had to be made to the nation’s bankruptcy laws.
She said too many people were losing their homes over debts of $10,000, which were often made up of legal fees, court costs and penalty interest charges.
“Forced bankruptcy is one of the most serious tools available to creditors and should only be used as a genuine last resort. Our report shows that without stronger safeguards and modernised laws, Australians risk losing their homes and livelihoods unnecessarily over relatively modest debts,” she said.
“Forced bankruptcy is appearing most in sectors that lack strong consumer protections, including rights to hardship support or fair dispute resolution. Put simply, it’s happening where safeguards are minimal.”
Mercedes-Benz Finance has launched the largest number of bankruptcy actions of any car finance company over the past four years.
The Australian Tax Office accounts for 13 per cent of bankruptcies as it takes more stringent action to recoup tax debts.
Major banks have all but stopped bankruptcy actions, which the FCA puts down to better hardship practices and codes of conduct.
But other lenders, including vehicle financing companies, are stepping into the breach.
Since 2021-22, the nation’s big four banks started 39 bankruptcy actions. Over the same period, Mercedes-Benz Finance launched 41, while BMW Finance started 34.
Vehicle finance companies account for 12 per cent of all financial sector bankruptcy actions, more than banks and insurance companies combined.
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While banks maintain a large share of overall lending, there has been strong growth by non-bank lenders that focus on small businesses and sole traders.
Since 2021-22, Bizfund – a lender that promotes itself as a business specialist that provides loans of between $5000 and $1 million without up-front credit checks – has started 153 bankruptcy actions, of which 64 were in 2024-25.
Other small lenders with large numbers of bankruptcy actions include Flexicommercial (59), TimberCorp Finance (29) and Metro Finance (23).
Financial Counselling Australia found small non-bank lenders were now initiating almost as many credit actions against customers as the Tax Office.
“That means these largely unregulated lenders are wielding the same enforcement power as the nation’s tax authority but with far fewer checks and balances,” it said.
In July last year, then attorney-general Mark Dreyfus announced the government would reform bankruptcy laws with the biggest change an increase in the threshold to start action lifted to $20,000. The threshold would be indexed annually.
Consultation on the changes is ongoing.
Financial Counselling Australia said the government should move quickly to implement the reforms while also require state and territory governments to overhaul strata rules to provide assistance for those at risk of bankruptcy.