No one likes to consider bankruptcy, which is easy to understand since bankruptcy will have an effect on your financial condition for several years to come. This may be one of the reasons why lots of people don’t seek financial support in times of need, because they are under the typical misconception that bankruptcy is the only way to settle their financial complications. Unfortunately, this isn’t the case as there are many opportunities available to those coping with financial difficulties. What most people don’t know is the sooner they act, the more possibilities will be generally be available to them.
In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter recording an 8% growth in the amount of bankruptcies cases than the preceding year. As a matter of fact, the September 2017 quarter was the ninth successive quarter where the amount 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 steady at 5.6% as of February 2018. While the unemployment statistics aren’t great, it’s floating around average levels which certainly wouldn’t cause an 8% increase in the number of personal bankruptcies. So, exactly what has caused 4,236 people to file for bankruptcy in the September 2017 quarter?
If you’re dealing with any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what components of your finances you should prioritise. Our world is shifting rapidly and detecting new risks in your own financial situation will help 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 results from excessive use of credit. This is significant, given that it is the very first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the primary cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that needs to be addressed. Banks charge enormous 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 (https://www.moneysmart.gov.au) has lots of online resources that can help those with credit card issues. Seeking financial guidance is strongly encouraged to show individuals how to plan and stick to 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 stable flow of income and depending only on Centrelink payments to continue being solvent. The best way to tackle an unforeseen 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 three to six months.
The third leading cause of personal bankruptcies in Australia comes from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Whilst divorces are not uncommon, financial problems arising from divorces are common given the associated legal expenses, child support, and the sudden transition into a one-income household. Many folks end up inheriting debts from their partners or are incapable of paying off existing credit because their costs have significantly increased.
Regardless of the reasons for your financial challenges, the fact remains that the sooner you seek financial help, the more prospects will typically be available to you to resolve these issues. Many people wrestle 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 specialists at Bankruptcy Experts Maitland on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsmaitland.com.au