Nobody wants to consider bankruptcy, which is easy to understand since bankruptcy will impair your financial situation for years to come. This may be one of the reasons why many people don’t look for financial guidance in times of need, because they are under the common misunderstanding that bankruptcy is the only way to fix their financial issues. Sadly, this isn’t the case as there are many solutions available to those dealing with financial difficulties. What lots of people don’t recognise is the sooner they act, the more options will be generally be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter showing an 8% growth in the amount of bankruptcies cases than the prior year. In truth, the September 2017 quarter was the ninth successive quarter where the number 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 stable at 5.6% as of February 2018. Even though the unemployment figures aren’t great, it’s hovering around average levels which certainly wouldn’t induce an 8% increase in the amount of personal bankruptcies. So, just what has caused 4,236 people to file for 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 need to prioritise. Our world is evolving quickly and pinpointing new risks in your own financial scenario 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 number one cause of bankruptcy in Australia today results from excessive use of credit. This is notable, considering that it is the first time since data collection began in 2007-08 that excessive use of credit has superseded unemployment as the number one cause of personal bankruptcy.
Undoubtedly, this is an ongoing issue that has to be addressed. Banks charge outrageous 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 lots of online resources that can assist those with credit card troubles. Seeking financial counselling is highly advised to educate individuals how to plan and stick to a budget.
Unemployment or loss of income continues to be one of the most contributing factors of personal bankruptcy. This comes as no surprise given that many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unplanned termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a regular source of income and relying only on Centrelink payments to continue to be solvent. The best way to handle an unplanned loss of income is to be prepared, which showcases the importance of setting up an emergency fund that can assist you and your family for 3 to 6 months.
The third leading cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are continuously increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems resulting from divorces are common given the affiliated legal expenses, child support, and the swift transition into a one-income household. Many people find themselves inheriting debts from their partners or are incapable of paying off existing credit because their costs have drastically increased.
Irrespective of the reasons for your financial troubles, the fact remains that the sooner you seek financial help, the more options will usually be available to you to resolve these issues. Many individuals grapple 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 Advice Adelaide on 1300 879 867, or alternatively visit our website for further information: www.bankruptcy-advice.com.au/Adelaide