Nobody wants to consider bankruptcy, which is understandable since bankruptcy will influence your financial situation for years to follow. This may be one of the reasons why people don’t look for financial help in times of need, because they are under the common misunderstanding that bankruptcy is the only way to resolve their financial problems. Sadly, this isn’t the case as there are many options available to those coping with financial difficulties. What most 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 increase again, with the September 2017 quarter recording an 8% growth in the number of bankruptcies proceedings than the preceding year. In fact, the September 2017 quarter was the ninth consecutive quarter wherein the amount of debt agreements increased. Like me, you may 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. Although 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, what exactly 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 elements of your finances you have to prioritise. Our world is evolving quickly and detecting new risks in your own financial scenario will enable 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 leading cause of bankruptcy in Australia today arises from excessive use of credit. This is remarkable, given that it is the very first time since data collection began in 2007-08 that excessive use of credit has overtaken unemployment as the number one cause of personal bankruptcy.
Obviously, this is an ongoing issue that should 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 lots of online resources that can help 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 continues to be one of the most contributing elements of personal bankruptcy. This comes as no surprise because many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unforeseen termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a steady flow of income and relying only on Centrelink payments to remain solvent. The best way to tackle an unpredicted loss of income is to be prepared, which highlights the importance of creating an emergency fund that can assist you and your family for 3 to 6 months.
The third leading cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. While divorces are not uncommon, financial problems resulting from divorces are common given the associated legal fees, child support, and the rapid transition into a one-income household. Many individuals end up inheriting debts from their partners or are unable to pay off existing credit because their expenses have substantially increased.
Irrespective of the reasons for your financial challenges, the fact remains that the sooner you seek financial assistance, 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. Call the professionals at Bankruptcy Experts Hobart on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertshobart.com.au