Nobody wants to look into bankruptcy, which is easy to understand given that bankruptcy will impair your financial situation for several years to follow. This may be one of the reasons why a lot of people don’t seek financial help in times of need, because they are under the typical misconception that bankruptcy is the only way to manage their financial concerns. Sadly, this isn’t the case as there are many possibilities available to those facing financial difficulties. What many 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 upswing again, with the September 2017 quarter showing an 8% surge in the amount of bankruptcies cases than the previous year. In fact, the September 2017 quarter was the ninth successive quarter in which the number 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% in February 2018. While the unemployment figures aren’t great, it’s floating around average levels which definitely wouldn’t trigger an 8% increase in the amount of personal bankruptcies. So, just what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re wrestling with any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what areas of your finances you should prioritise. Our world is transforming dramatically and discovering new risks in your own financial circumstance will enable 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 top cause of bankruptcy in Australia today arises from excessive use of credit. This is remarkable, since it is the very first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the greatest cause of personal bankruptcy.
Undoubtedly, this is an ongoing issue that has to be addressed. Banks charge excessive fees and interest charges for late credit card repayments, so if you’re currently behind in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can aid those with credit card troubles. Seeking financial counselling is strongly encouraged to educate individuals how to plan and follow a budget.
Unemployment or loss of income remains to be one of the most contributing aspects of personal bankruptcy. This comes as no surprise considering that many Australian’s don’t have income insurance or an emergency fund which they can use if they experience an unanticipated termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a regular income source and depending only on Centrelink payments to continue being solvent. The best way to tackle an unforeseen loss of income is to be prepared, which emphasises the importance of setting up an emergency fund that can support you and your family for 3 to 6 months.
The third biggest cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Even though divorces are not uncommon, financial problems caused by divorces are common given the accompanying legal costs, child support, and the abrupt transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are unable to pay off existing credit because their expenses have dramatically increased.
Regardless of the reasons for your financial difficulties, the fact remains that the sooner you seek financial support, the more options will typically 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. Reach out to the professionals at Bankruptcy Experts Coffs Harbour on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertscoffsharbour.com.au