Top 3 Reasons For Personal Bankruptcy in Australia
Nobody likes to consider bankruptcy, which is easy to understand considering that bankruptcy will have an effect on your financial circumstance for several years to come. This may be one of the reasons why lots of people don’t look for financial assistance in times of need, because they are under the general misunderstanding that bankruptcy is the only way to deal with their financial troubles. Sadly, this isn’t the case as there are many solutions available to those experiencing financial difficulties. What most people don’t know is the sooner they act, the more solutions will be typically be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter indicating an 8% increase in the amount of bankruptcies cases than the prior year. In truth, the September 2017 quarter was the ninth consecutive quarter where the number of debt agreements increased. Like me, you may 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. Even though the unemployment numbers aren’t exemplary, it’s hovering around average levels which surely wouldn’t cause an 8% increase in the number of personal bankruptcies. So, just what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re wrestling with any financial hardship, 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 quickly and identifying new risks in your own financial circumstance will allow you to proactively address them. To give you some insight, here are the top three causes of personal bankruptcy in Australia in 2017.
Excessive use of credit
The greatest cause of bankruptcy in Australia today results from excessive use of credit. This is notable, given that it is the first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the leading cause of personal bankruptcy.
Undoubtedly, this is an ongoing issue that must be addressed. Banks charge extravagant fees and interest charges for late credit card repayments, so if you’re already behind in your credit card repayments, act 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 strongly encouraged 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 comes as no surprise 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 presently at 5.6%, this leaves many Australians without a regular income source and depending only on Centrelink payments to continue to be solvent. The best way to deal with an unforeseen loss of income is to be prepared, which highlights the importance of developing an emergency fund that can assist you and your family for 3 to 6 months.
The third leading cause of personal bankruptcies in Australia comes from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. While divorces are not uncommon, financial problems caused by divorces are common given the accompanying legal fees, child support, and the abrupt transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are incapable of paying off existing credit because their expenditures have greatly increased.
Irrespective of the reasons for your financial difficulties, the fact remains that the sooner you seek financial support, the more possibilities will generally 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. Get in touch with the professionals at Bankruptcy Experts Geelong on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsgeelong.com.au