Nobody likes to think about bankruptcy, which is understandable considering that bankruptcy will impair your financial circumstance for several years to follow. This may be one of the reasons why individuals don’t seek financial support in times of need, because they are under the typical misconception that bankruptcy is the only way to work out their financial dilemmas. Sadly, this isn’t the case as there are many possibilities available to those dealing with financial difficulties. What most individuals don’t recognise is the sooner they act, the more solutions will be generally be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter indicating an 8% growth in the number of bankruptcies proceedings than the preceding year. In reality, the September 2017 quarter was the ninth consecutive quarter wherein the number of debt agreements increased. Like me, you are perhaps wondering why?
Well, the economy is doing fine with interest rates still at record lows and unemployment steady at 5.6% as of February 2018. While the unemployment numbers aren’t ideal, it’s hovering around average levels which undoubtedly wouldn’t lead to 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 hardship, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you should prioritise. Our world is evolving dramatically 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 number one cause of bankruptcy in Australia today results from excessive use of credit. This is significant, given that it is the first time since data collection started in 2007-08 that excessive use of credit has taken over unemployment as the number one cause of personal bankruptcy.
Naturally, this is an ongoing issue that should be addressed. Banks charge extravagant fees and interest charges for late credit card repayments, so if you’re currently 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 assist those with credit card issues. Seeking financial guidance is highly 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 factors of personal bankruptcy. This doesn’t come as a suprise given that many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unplanned termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a reliable income source and depending only on Centrelink payments to continue to be solvent. The best way to deal with an unexpected loss of income is to be prepared, which highlights the importance of developing an emergency fund that can support you and your family for three to six months.
The third largest cause of personal bankruptcies in Australia derives 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 arising from divorces are common given the associated legal expenses, child support, and the sudden transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are not able to pay off existing credit because their costs have significantly increased.
Irrespective of the reasons for your financial difficulties, the fact remains that the sooner you seek financial assistance, the more prospects will usually be available to you to resolve these issues. Lots of individuals wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Get in contact with the professionals at Bankruptcy Experts Sunshine Coast on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertssunshinecoast.com.au