Nobody wants to contemplate bankruptcy, which is easy to understand since bankruptcy will affect your financial situation for 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 general misunderstanding that bankruptcy is the only way to manage their financial complications. Sadly, this isn’t the case as there are many alternatives available to those facing financial difficulties. What lots of people don’t know is the sooner they act, the more alternatives will be generally be available to them.
In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter indicating an 8% growth in the amount of bankruptcies cases than the preceding year. In reality, 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 an all-time low and unemployment stable at 5.6% as of February 2018. Even though the unemployment statistics aren’t great, it’s floating around average levels which definitely wouldn’t bring about 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 confronting any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you have to prioritise. Our world is shifting dramatically and recognising new risks in your own financial situation will enable 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 top cause of bankruptcy in Australia today comes from excessive use of credit. This is significant, given that it is the first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the leading cause of personal bankruptcy.
Naturally, 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 aid those with credit card troubles. Seeking financial counselling is strongly advised to educate 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 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 face an unplanned termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a steady income source and relying only on Centrelink payments to continue being solvent. The best way to manage an unanticipated loss of income is to be prepared, which highlights the importance of creating an emergency fund that can support you and your family for three to six months.
The third leading 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 caused by divorces are common given the associated legal fees, child support, and the abrupt transition into a one-income household. Many people end up inheriting debts from their partners or are not able to pay off existing credit because their expenses have substantially increased.
Regardless of the reasons for your financial troubles, the fact remains that the sooner you seek financial help, the more options will typically 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. Speak with the professionals at Bankruptcy Experts Frankston on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsfrankston.com.au