Australia's bankruptcy rates have increased by 261 per cent over nearly 20 years, according to a study by the Melbourne Law School.

The study's author, Professor Ian Ramsay, says bankruptcy has now hit the nation's middle class, with a 50 per cent rise in insolvency in New South Wales alone.

"That rate of increase dramatically exceeds, for example, the increase in population in Australia over the corresponding period," he said.

"So, effectively, a greater proportion of the Australian population, over the period that we examined, was becoming personally insolvent."

Comparing the last six months of 2008 with the last six months of 2007, the study found a 12 per cent jump in bankruptcies over the past year alone.

Professor Ramsay says Australia's love affair with credit is the main cause.

Over the last 10 years, excessive use of credit as a cause of non-business related bankruptcies has gone up by more than 100 per cent," he said.

"Over the period of time we've found quite a significant increase in the age of bankrupts. We also found ill health as a growing reason for people going bankrupt.

"One interesting finding was gambling. What we found was a significant increase in the last 10 years, up something like 230 per cent, as a cause of bankruptcy."

Professor Ramsay says bankruptcy is becoming more of a middle class phenomenon.

"Effectively, we found that bankrupts are coming from higher status occupations," he said.

"They also have increasing levels of both personal income, but also household income. They also have increasing assets and property ownership levels.

"So even during these times, where there was strong economic growth in Australia, we still found that bankruptcy was claiming, if you like, more and more of the Australian middle class.

"We found a growing number of bankrupts with dependents. So, clearly there's an important family context here."

The most significant increase in bankruptcies has occurred in New South Wales.

"In fact, a 50 per cent increase in the proportion of bankruptcies occurring in New South Wales between 1997 and 2008," he said.

"And that's not just a factor of New South Wales having more people, it is that there's just more bankruptcies occurring in that state."

The study investigated personal insolvency under the Bankruptcy Act, from 1990 until 2008. That covered Australia's economic boom time.

Professor Ramsay predicts bankruptcy rates will skyrocket in the months and years ahead.

"Looking ahead though, of course, the conclusion would need to be, in my view, that these trends would actually accelerate," he said.

"And what are those trends? The trends are a greater number of Australians becoming personally insolvent and, of course, personal insolvency, including bankruptcy, affecting more and more parts of the Australian society, including the Australian middle class."

Financial and Consumer Rights Council executive officer Richard Foster says he is not surprised by the figures.

"This is a case of 'greed is bad'," he said.

"We are seeing an increasing number of people coming to financial counsellors and consumer advocates with no option other than to consider bankruptcy.

"What's concerning most about the study is that it commenced at the height of the last recession and the numbers have only gone up ever since. So, what we can expect in the future, I expect, is more of the same."