Top 3 Causes of Personal Bankruptcy in Australia
Nobody likes to think about bankruptcy, which is easy to understand since bankruptcy will influence your financial circumstance for several years to come. This may be one of the reasons why lots of people don’t look for financial help in times of need, because they are under the typical misunderstanding that bankruptcy is the only way to deal with their financial concerns. Sadly, this isn’t the case as there are many solutions available to those coping with financial difficulties. What most people don’t recognise is the sooner they act, the more possibilities will be typically be available to them.
In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter showing an 8% growth in the amount of bankruptcies cases than the last year. As a matter of fact, the September 2017 quarter was the ninth consecutive quarter in which the number of debt agreements increased. Like me, you are perhaps wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment stable at 5.6% as of February 2018. While the unemployment statistics aren’t ideal, it’s hovering around average levels which undoubtedly wouldn’t lead to an 8% increase in the number of personal bankruptcies. So, what exactly has caused 4,236 people to file for 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 areas of your finances you need to prioritise. Our world is shifting quickly and discovering new risks in your own financial scenario 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 exceptional, given that it is the very first time since data collection started in 2007-08 that excessive use of credit has taken over unemployment as the primary cause of personal bankruptcy.
Unmistakably, 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 overdue in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can assist those with credit card issues. Seeking financial guidance is strongly recommended to teach individuals how to plan and stick to a budget.
Unemployment or loss of income remains to be one of the most contributing elements 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 unplanned resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a stable flow of income and depending only on Centrelink payments to continue being solvent. The best way to cope with an unforeseen loss of income is to be prepared, which emphasises the importance of setting up an emergency fund that can assist 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 steadily 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 affiliated legal expenses, child support, and the sudden transition into a one-income household. Many people end up inheriting debts from their partners or are unable to pay off existing credit because their costs have greatly increased.
Regardless of the reasons for your financial difficulties, the fact remains that the sooner you seek financial guidance, the more possibilities will generally be available to you to resolve these issues. Lots of individuals wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Get in touch with the specialists at Bankruptcy Experts Australia on 1300 795 575, or alternatively visit our website for additional information: Bankrupt Australia