Top 3 Causes of Personal Bankruptcy in Australia

No one wants to contemplate bankruptcy, which is understandable considering that bankruptcy will affect your financial circumstance for several years to come. This may be one of the reasons why a lot of people don’t look for 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. Unfortunately, this isn’t the case as there are many solutions available to those experiencing financial difficulties. What lots of people don’t know is the sooner they act, the more opportunities will be typically be available to them.

In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter recording an 8% increase in the amount of bankruptcies cases than the preceding year. In truth, the September 2017 quarter was the ninth continuous 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 record lows and unemployment stable at 5.6% in February 2018. Whilst the unemployment figures aren’t ideal, it’s hovering around average levels which undoubtedly wouldn’t induce 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 confronting 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 evolving 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 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 very first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the primary cause of personal bankruptcy.

Undoubtedly, this is an ongoing issue that should be addressed. Banks charge outrageous 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 ( has lots of online resources that can assist those with credit card problems. Seeking financial guidance is strongly encouraged to teach individuals how to plan and follow a budget.


Unemployment or loss of income remains to be one of the most contributing factors of personal bankruptcy. This comes as no surprise considering that many Australian’s don’t have income insurance or an emergency fund which they can use if they face an unforeseen resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a regular income source 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 developing an emergency fund that can support you and your family for three to six months.

Relationship breakdowns

The third leading cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems arising from divorces are common given the associated legal expenses, 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 significantly increased.

Looking ahead

Regardless of the reasons for your financial concerns, the fact remains that the sooner you seek financial support, the more options 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 Advice on 1300 879 867, or alternatively visit our website for additional information: