Top 3 Causes of Personal Bankruptcy in Australia
Nobody wants to consider bankruptcy, which is understandable since bankruptcy will affect your financial situation for years to follow. This may be one of the reasons why lots 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 fix their financial complications. Unfortunately, this isn’t the case as there are many possibilities available to those facing financial difficulties. What lots of people don’t recognise is the sooner they act, the more opportunities will be typically be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter indicating an 8% increase in the amount of bankruptcies proceedings than the previous year. In truth, the September 2017 quarter was the ninth successive quarter where the number of debt agreements increased. Like me, you are perhaps wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment stable at 5.6% in February 2018. Whilst the unemployment rates aren’t great, it’s floating around average levels which definitely wouldn’t cause 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 dealing with any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you need to prioritise. Our world is changing dramatically and recognising new risks in your own financial scenario will enable 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 arises from excessive use of credit. This is remarkable, given that it is the very first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the greatest cause of personal bankruptcy.
Naturally, this is an ongoing issue that must be addressed. Banks charge enormous 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 plenty of online resources that can aid 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 remains to be one of the most contributing elements 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 experience an unforeseen termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a stable income source and relying only on Centrelink payments to remain solvent. The best way to manage an unanticipated loss of income is to be prepared, which accentuates the importance of creating an emergency fund that can support you and your family for 3 to 6 months.
The third biggest cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems arising from divorces are common given the accompanying legal fees, child support, and the swift 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 significantly increased.
Irrespective of the reasons for your financial concerns, the fact remains that the sooner you seek financial guidance, the more prospects will generally 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. Contact the specialists at Bankruptcy Experts Wollongong on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertswollongong.com.au