Top 3 Causes of Personal Bankruptcy in Australia
No one likes to look into bankruptcy, which is understandable considering that bankruptcy will impact your financial situation for several years to follow. This may be one of the reasons why individuals don’t seek financial assistance in times of need, because they are under the general misconception that bankruptcy is the only way to settle their financial complications. Sadly, this isn’t the case as there are many options available to those coping with financial difficulties. What most people don’t understand is the sooner they act, the more possibilities will be generally be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter indicating an 8% increase in the number of bankruptcies proceedings than the last year. In reality, the September 2017 quarter was the ninth successive quarter wherein the amount 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% in February 2018. While the unemployment rates aren’t optimal, it’s hovering around average levels which surely wouldn’t trigger 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 factors of your finances you should prioritise. Our world is shifting rapidly and detecting new risks in your own financial situation will enable you to proactively address 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 arises from excessive use of credit. This is remarkable, since it is the very first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the top cause of personal bankruptcy.
Unmistakably, 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 already behind in your credit card repayments, take action now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has loads of online resources that can help those with credit card issues. Seeking financial counselling is highly recommended to teach individuals how to plan and stick to a budget.
Unemployment or loss of income continues to be one of the most contributing aspects of personal bankruptcy. This doesn’t come as a suprise since many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unplanned termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a stable source of income and depending only on Centrelink payments to continue to be solvent. The best way to manage an unpredicted loss of income is to be prepared, which accentuates the importance of creating an emergency fund that can assist you and your family for 3 to 6 months.
The third biggest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Even though divorces are not uncommon, financial problems caused by divorces are common given the accompanying legal expenses, child support, and the sudden transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are unable to pay off existing credit because their expenses have significantly increased.
Regardless of the reasons for your financial problems, the fact remains that the sooner you seek financial support, the more possibilities will typically be available to you to resolve these issues. Lots of 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 Experts Sydney on 1300 795 575, or alternatively visit our website for additional information: Bankruptcy Sydney