No one likes to think about bankruptcy, which is easy to understand given that bankruptcy will impact your financial circumstance for several years to come. This may be one of the reasons why many people don’t seek financial support in times of need, because they are under the common misunderstanding that bankruptcy is the only way to deal with their financial problems. Sadly, this isn’t the case as there are many possibilities available to those dealing with financial difficulties. What most people don’t know is the sooner they act, the more choices will be typically be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter recording an 8% surge in the amount of bankruptcies proceedings than the preceding year. In fact, the September 2017 quarter was the ninth successive 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 record lows and unemployment stable at 5.6% as of February 2018. Even though the unemployment rates aren’t great, it’s floating around average levels which certainly wouldn’t cause 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 dealing with 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 rapidly and discovering new risks in your own financial circumstance 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 leading cause of bankruptcy in Australia today comes from excessive use of credit. This is notable, given that it is the first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the primary cause of personal bankruptcy.
Obviously, this is an ongoing issue that ought to be addressed. Banks charge enormous fees and interest charges for late credit card repayments, so if you’re already behind 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 assist those with credit card problems. Seeking financial guidance is highly advised to show individuals how to plan and follow a budget.
Unemployment or loss of income continues 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 experience an unexpected termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a stable flow of income and relying only on Centrelink payments to remain solvent. The best way to cope with an unpredicted loss of income is to be prepared, which emphasises the importance of establishing 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 caused by divorces are common given the associated legal fees, child support, and the sudden transition into a one-income household. Many people find themselves inheriting debts from their partners or are unable to pay off existing credit because their expenses have greatly increased.
Irrespective of the reasons for your financial problems, the fact remains that the sooner you seek financial help, the more opportunities will usually 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. Contact the specialists at Bankruptcy Experts Joondalup on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertsjoondalup.com.au