No one likes to look into bankruptcy, which is understandable considering that bankruptcy will bear upon your financial condition for years to follow. This may be one of the reasons why individuals don’t seek financial help in times of need, because they are under the typical misconception that bankruptcy is the only way to fix their financial concerns. Sadly, this isn’t the case as there are many solutions available to those facing financial difficulties. What most people don’t understand is the sooner they act, the more opportunities will be generally be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter marking an 8% growth in the number of bankruptcies cases than the preceding year. As a matter of fact, the September 2017 quarter was the ninth consecutive quarter where the number of debt agreements increased. Like me, you might be wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment steady at 5.6% in February 2018. Even though the unemployment numbers aren’t optimal, it’s floating around average levels which definitely wouldn’t cause an 8% increase in the number of personal bankruptcies. So, just what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re dealing with any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you need to prioritise. Our world is changing quickly and identifying new risks in your own financial situation will help you to proactively address them. To give you some insight, here are the top 3 causes of personal bankruptcy in Australia in 2017.
Excessive use of credit
The number one cause of bankruptcy in Australia today arises from excessive use of credit. This is notable, since it is the very first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the greatest cause of personal bankruptcy.
Clearly, this is an ongoing issue that needs to be addressed. Banks charge enormous fees and interest charges for late credit card repayments, so if you’re currently overdue in your credit card repayments, take action now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can aid those with credit card problems. Seeking financial guidance is strongly advised to teach individuals how to plan and follow a budget.
Unemployment or loss of income remains to be one of the most contributing factors of personal bankruptcy. This doesn’t come as a suprise since many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unexpected resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a stable flow of income and depending only on Centrelink payments to remain solvent. The best way to manage an unanticipated loss of income is to be prepared, which accentuates the importance of creating an emergency fund that can support you and your family for 3 to 6 months.
The third largest cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. While divorces are not uncommon, financial problems resulting from divorces are common given the associated legal fees, child support, and the abrupt transition into a one-income household. Many folks end up inheriting debts from their partners or are not able to pay off existing credit because their expenses have substantially increased.
Regardless of the reasons for your financial issues, the fact remains that the sooner you seek financial help, the more options will typically be available to you to resolve these issues. Lots of folks wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Reach out to the specialists at Bankruptcy Experts Wangaratta on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertswangaratta.com.au