Top 3 Reasons For Personal Bankruptcy in Australia

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No one wants to look into bankruptcy, which is easy to understand considering that bankruptcy will influence your financial circumstance for several years to come. This may be one of the reasons why people don’t seek financial guidance in times of need, because they are under the typical misconception that bankruptcy is the only way to settle their financial concerns. Unfortunately, this isn’t the case as there are many opportunities available to those experiencing financial difficulties. What lots of people don’t recognise is the sooner they act, the more alternatives will be typically be available to them.

In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter showing an 8% increase in the number of bankruptcies cases than the last 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. Although the unemployment numbers aren’t exemplary, it’s floating around average levels which definitely wouldn’t lead to 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 grappling any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you need to prioritise. Our world is shifting dramatically and discovering new risks in your own financial circumstance 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 top cause of bankruptcy in Australia today results from excessive use of credit. This is significant, since it is the first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the leading cause of personal bankruptcy.

Clearly, this is an ongoing issue that must be addressed. Banks charge exorbitant fees and interest charges for late credit card repayments, so if you’re already overdue in your credit card repayments, do something about it now. The Government’s MoneySmart website ( has plenty of online resources that can assist those with credit card troubles. Seeking financial guidance is strongly encouraged to show individuals how to plan and stick to a budget.


Unemployment or loss of income remains to be one of the most contributing aspects 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 resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a stable source of income and depending only on Centrelink payments to remain solvent. The best way to cope with an unforeseen loss of income is to be prepared, which highlights the importance of establishing an emergency fund that can assist you and your family for three to six months.

Relationship breakdowns

The third biggest cause of personal bankruptcies in Australia stems 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 affiliated legal costs, child support, and the rapid 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 expenses have greatly increased.

Looking ahead

Regardless of the reasons for your financial challenges, the fact remains that the sooner you seek financial assistance, the more prospects will generally be available to you to resolve these issues. Many people grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Speak to the professionals at Bankruptcy Advice Perth on 1300 879 867, or alternatively visit our website for additional information:


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