Nobody wants to consider bankruptcy, which is understandable given that bankruptcy will impact your financial situation for years to follow. This may be one of the reasons why many people don’t look for financial assistance in times of need, because they are under the popular misunderstanding that bankruptcy is the only way to settle their financial complications. Sadly, this isn’t the case as there are many choices available to those coping with financial difficulties. What most people don’t understand is the sooner they act, the more possibilities will be generally be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter recording an 8% growth in the number of bankruptcies cases than the preceding year. In reality, the September 2017 quarter was the ninth consecutive quarter wherein the amount of debt agreements increased. Like me, you are perhaps wondering why?
Well, the economy is doing fine with interest rates still at record lows and unemployment stable at 5.6% in February 2018. Although the unemployment statistics aren’t exemplary, it’s hovering around average levels which surely wouldn’t bring about 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 confronting any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what areas of your finances you have to prioritise. Our world is shifting dramatically and recognising new risks in your own financial situation will allow you to proactively manage 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 comes from excessive use of credit. This is exceptional, considering that it is the very first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the leading cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that should be addressed. Banks charge extravagant 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 loads of online resources that can help those with credit card problems. Seeking financial guidance is strongly advised to educate individuals how to plan and follow a budget.
Unemployment or loss of income continues to be one of the most contributing factors of personal bankruptcy. This comes as no surprise since many Australian’s don’t have income insurance or an emergency fund which they can use if they face an unanticipated termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a regular flow of income and depending only on Centrelink payments to remain solvent. The best way to cope with an unplanned 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 greatest cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Whilst divorces are not uncommon, financial problems resulting from divorces are common given the accompanying legal fees, child support, and the abrupt transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are not able to pay off existing credit because their expenses have greatly increased.
Regardless of the reasons for your financial troubles, the fact remains that the sooner you seek financial support, the more possibilities 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. Talk with the professionals at Bankruptcy Experts Shellharbour on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsshellharbour.com.au