Top 3 Causes of Personal Bankruptcy in Australia
No one wants to contemplate bankruptcy, which is understandable given that bankruptcy will disturb your financial circumstance for years to follow. This may be one of the reasons why lots of people don’t look for financial help in times of need, because they are under the typical misunderstanding that bankruptcy is the only way to resolve their financial problems. Sadly, this isn’t the case as there are many choices available to those experiencing 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 climb again, with the September 2017 quarter showing an 8% growth in the amount of bankruptcies proceedings than the last year. As a matter of fact, the September 2017 quarter was the ninth successive quarter wherein the amount 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 steady at 5.6% in February 2018. Even though the unemployment numbers aren’t optimal, it’s hovering around average levels which definitely wouldn’t cause an 8% increase in the amount of personal bankruptcies. So, just what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re grappling any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what elements of your finances you need to prioritise. Our world is evolving dramatically and recognising new risks in your own financial situation will enable 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 top cause of bankruptcy in Australia today comes from excessive use of credit. This is notable, since it is the very first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the top cause of personal bankruptcy.
Obviously, this is an ongoing issue that should be addressed. Banks charge exorbitant fees and interest charges for late credit card repayments, so if you’re currently overdue in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can help those with credit card troubles. Seeking financial guidance is highly advised to show individuals how to plan and stick to a budget.
Unemployment or loss of income remains to be one of the most contributing aspects 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 unexpected resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a steady flow of income and relying only on Centrelink payments to continue being solvent. The best way to handle an unpredicted loss of income is to be prepared, which emphasises the importance of creating an emergency fund that can support 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 continuously increasing, with the ABS recording 46,604 divorces in 2016. Whilst 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 folks find themselves inheriting debts from their partners or are incapable of paying off existing credit because their expenses have greatly increased.
Irrespective of the reasons for your financial difficulties, the fact remains that the sooner you seek financial assistance, the more prospects will typically be available to you to resolve these issues. Lots of people wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Reach out to the specialists at Bankruptcy Experts Melbourne on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsmelbourne.com.au