More Australians are using debt agreements to avoid bankruptcy.
Nearly 50,000 people have used the agreements during the past five years, resulting in a 20 per cent decline in bankruptcies.
Debt agreements are principally aimed at consumer debtors.
They provide the protections of bankruptcy, such as staying enforcement action against provable debts and relief from harassment.
They also release debts that would be provable in a bankruptcy if the debtor satisfies all the obligations under the agreement.
As well, the debtor does not need to have to all creditors agree to an agreement proposal, unlike an informal arrangement to settle debts.
The agreements also help debtors keep their house.
"Debt agreements give many Australians in financial distress an alternative option to get back on their feet sooner than bankruptcy," federal Attorney-General Nicola Roxon said in a statement on Thursday.
In many cases they could be the smarter way forward, especially as bankruptcy could leave a financial legacy for years, she said.
Figures from the Insolvency and Trustee Service Australia show there were 150,353 bankruptcies between January 1, 2007 and December 31, 2012.
During the same time debt agreements increased 68 per cent to 49,034.