Nobody likes to look into bankruptcy, which is understandable since bankruptcy will bear upon your financial condition for several years to come. This may be one of the reasons why lots of people don’t seek financial assistance in times of need, because they are under the general misconception that bankruptcy is the only way to manage their financial complications. Unfortunately, this isn’t the case as there are many opportunities available to those coping with financial difficulties. What most individuals don’t understand is the sooner they act, the more options will be generally be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter recording an 8% surge in the number of bankruptcies proceedings than the preceding year. In truth, the September 2017 quarter was the ninth successive quarter wherein the amount of debt agreements increased. Like me, you might be wondering why?
Well, the economy is doing fine with interest rates still at record lows and unemployment steady at 5.6% as of February 2018. While the unemployment statistics aren’t optimal, it’s floating around average levels which surely wouldn’t induce an 8% increase in the amount of personal bankruptcies. So, what exactly has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re confronting any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you need to prioritise. Our world is evolving quickly and pinpointing new risks in your own financial situation 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 primary cause of bankruptcy in Australia today comes from excessive use of credit. This is exceptional, since it is the first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the leading cause of personal bankruptcy.
Obviously, this is an ongoing issue that has to be addressed. Banks charge enormous fees and interest charges for late credit card repayments, so if you’re currently behind 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 help those with credit card issues. Seeking financial counselling is highly encouraged to show individuals how to plan and stick to a budget.
Unemployment or loss of income remains to be one of the most contributing aspects of personal bankruptcy. This doesn’t come as a suprise because many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unplanned resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a regular source of income and depending only on Centrelink payments to continue being solvent. The best way to manage an unforeseen loss of income is to be prepared, which highlights the importance of establishing an emergency fund that can assist you and your family for 3 to 6 months.
The third leading cause of personal bankruptcies in Australia comes from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. While divorces are not uncommon, financial problems arising from divorces are common given the accompanying legal costs, child support, and the swift transition into a one-income household. Many individuals end up inheriting debts from their partners or are not able to pay off existing credit because their expenditures have dramatically increased.
Irrespective of the reasons for your financial challenges, the fact remains that the sooner you seek financial guidance, the more opportunities will generally be available to you to resolve these issues. Lots of individuals grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Speak to the specialists at Bankruptcy Experts Adelaide on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertsadelaide.com.au