No one likes to contemplate bankruptcy, which is understandable since bankruptcy will have an effect on your financial situation for several years to come. This may be one of the reasons why a lot of people don’t seek financial guidance in times of need, because they are under the common misconception that bankruptcy is the only way to manage their financial concerns. Sadly, this isn’t the case as there are many solutions available to those experiencing financial difficulties. What many people don’t recognise is the sooner they act, the more alternatives will be generally be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter marking an 8% surge in the amount of bankruptcies cases than the last year. In fact, the September 2017 quarter was the ninth successive quarter where the number of debt agreements increased. Like me, you may be wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment stable at 5.6% in February 2018. Whilst the unemployment numbers aren’t optimal, it’s hovering around average levels which definitely wouldn’t trigger an 8% increase in the amount of personal bankruptcies. So, exactly what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re facing any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what factors of your finances you need to prioritise. Our world is changing quickly and pinpointing new risks in your own financial circumstance will allow you to proactively address them. To give you some insight, here are the top three causes of personal bankruptcy in Australia in 2017.
Excessive use of credit
The leading cause of bankruptcy in Australia today comes from excessive use of credit. This is significant, given that it is the first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the primary cause of personal bankruptcy.
Clearly, this is an ongoing issue that ought to be addressed. Banks charge extravagant fees and interest charges for late credit card repayments, so if you’re already behind in your credit card repayments, do something about it now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can assist those with credit card problems. Seeking financial counselling is strongly recommended to show individuals how to plan and follow a budget.
Unemployment or loss of income continues to be one of the most contributing elements of personal bankruptcy. This doesn’t come as a suprise given that many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unexpected resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a reliable income source and depending only on Centrelink payments to continue to be solvent. The best way to manage an unpredicted loss of income is to be prepared, which showcases the importance of setting up an emergency fund that can support you and your family for 3 to 6 months.
The third largest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are continuously increasing, with the ABS recording 46,604 divorces in 2016. Even though divorces are not uncommon, financial problems arising from divorces are common given the affiliated legal fees, child support, and the abrupt transition into a one-income household. Many people find themselves inheriting debts from their partners or are unable to pay off existing credit because their expenditures have substantially increased.
Irrespective of the reasons for your financial issues, the fact remains that the sooner you seek financial support, the more options will generally be available to you to resolve these issues. Many individuals wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Speak with the professionals at Bankruptcy Australia on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcy-australia.net.au