Nobody likes to think about bankruptcy, which is understandable considering that bankruptcy will disturb your financial situation for several years to follow. This may be one of the reasons why people don’t seek financial support in times of need, because they are under the typical misconception that bankruptcy is the only way to fix their financial troubles. Unfortunately, this isn’t the case as there are many alternatives available to those coping with financial difficulties. What most individuals don’t understand is the sooner they act, the more opportunities will be typically be available to them.
In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter marking an 8% growth in the number of bankruptcies proceedings than the prior year. In fact, the September 2017 quarter was the ninth successive quarter where the amount of debt agreements increased. Like me, you might be wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment steady at 5.6% as of February 2018. Even though the unemployment statistics aren’t exemplary, it’s floating around average levels which certainly wouldn’t trigger 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 grappling any financial distress, 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 detecting new risks in your own financial scenario will enable you to proactively manage them. To give you some insight, here are the top 3 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 very first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the greatest cause of personal bankruptcy.
Evidently, this is an ongoing issue that ought to be addressed. Banks charge excessive fees and interest charges for late credit card repayments, so if you’re already overdue in your credit card repayments, do something about it now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can aid those with credit card problems. Seeking financial counselling is highly encouraged to teach individuals how to plan and follow a budget.
Unemployment or loss of income remains 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 face an unexpected resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a regular income source and relying only on Centrelink payments to continue to be solvent. The best way to manage an unplanned loss of income is to be prepared, which accentuates the importance of developing an emergency fund that can assist you and your family for three to six months.
The third biggest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are continuously 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 rapid transition into a one-income household. Many people find themselves inheriting debts from their partners or are unable to pay off existing credit because their costs have substantially increased.
Regardless of the reasons for your financial problems, the fact remains that the sooner you seek financial assistance, the more options 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. Call the specialists at Bankruptcy Experts Geraldton on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsgeraldton.com.au