Nobody wants to think about bankruptcy, which is understandable given that bankruptcy will have an effect on your financial circumstance for several 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 misconception that bankruptcy is the only way to fix their financial issues. Sadly, this isn’t the case as there are many alternatives available to those experiencing financial difficulties. What lots of people don’t recognise is the sooner they act, the more alternatives will be generally be available to them.
In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter recording an 8% increase in the number of bankruptcies proceedings than the preceding year. As a matter of fact, the September 2017 quarter was the ninth successive quarter wherein the number of debt agreements increased. Like me, you might be wondering why?
Well, the economy is doing fine with interest rates still at record lows and unemployment steady at 5.6% in February 2018. Whilst the unemployment statistics aren’t optimal, it’s hovering around average levels which definitely 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 wrestling with any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what components of your finances you have to prioritise. Our world is evolving rapidly and recognising 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 number one cause of bankruptcy in Australia today results from excessive use of credit. This is exceptional, since it is the very first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the leading cause of personal bankruptcy.
Obviously, this is an ongoing issue that needs to be addressed. Banks charge outrageous fees and interest charges for late credit card repayments, so if you’re already overdue in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can assist those with credit card problems. Seeking financial counselling is highly 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 given that many Australian’s don’t have income insurance or an emergency fund which they can use if they face an unplanned resignation or termination. With unemployment rates currently 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 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 greatest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems resulting from divorces are common given the affiliated legal expenses, child support, and the abrupt 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 challenges, the fact remains that the sooner you seek financial guidance, the more opportunities 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. Speak to the professionals at Bankruptcy Experts Cassowary Coast on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertscassowarycoast.com.au