No one wants to think about bankruptcy, which is understandable considering that bankruptcy will alter your financial condition for years to follow. This may be one of the reasons why individuals don’t look for financial support in times of need, because they are under the typical misunderstanding that bankruptcy is the only way to deal with their financial issues. Unfortunately, this isn’t the case as there are many choices available to those dealing with financial difficulties. What lots of people don’t recognise is the sooner they act, the more possibilities will be generally be available to them.
In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter indicating an 8% growth in the number of bankruptcies proceedings than the prior year. In fact, the September 2017 quarter was the ninth consecutive quarter in which 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 rates aren’t optimal, it’s hovering around average levels which definitely wouldn’t bring about an 8% increase in the amount of personal bankruptcies. So, what exactly has caused 4,236 people to declare 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 elements of your finances you have to prioritise. Our world is evolving rapidly and identifying new risks in your own financial scenario will allow you to proactively manage 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 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 overtaken unemployment as the leading cause of personal bankruptcy.
Undoubtedly, this is an ongoing issue that must be addressed. Banks charge excessive fees and interest charges for late credit card repayments, so if you’re currently 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 aid those with credit card problems. Seeking financial guidance is strongly recommended 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 considering that 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 presently at 5.6%, this leaves many Australians without a reliable source of income and relying only on Centrelink payments to remain solvent. The best way to cope with an unplanned loss of income is to be prepared, which emphasises the importance of developing 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 progressively 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 associated legal fees, 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 expenditures have greatly increased.
Irrespective of the reasons for your financial difficulties, 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 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 Kalgoorlie on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertskalgoorlie.com.au