Nobody wants to think about bankruptcy, which is easy to understand given that bankruptcy will bear upon your financial circumstance for several years to come. This may be one of the reasons why individuals don’t seek financial guidance in times of need, because they are under the common misunderstanding that bankruptcy is the only way to deal with their financial troubles. Sadly, this isn’t the case as there are many possibilities available to those dealing with financial difficulties. What most 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 rise again, with the September 2017 quarter showing an 8% surge in the amount of bankruptcies cases than the last year. In fact, the September 2017 quarter was the ninth continuous quarter in which the number of debt agreements increased. Like me, you may be wondering why?
Well, the economy is doing fine with interest rates still at record lows and unemployment stable at 5.6% as of February 2018. Even though the unemployment statistics aren’t ideal, it’s floating around average levels which certainly wouldn’t cause an 8% increase in the number of personal bankruptcies. So, what exactly 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 areas of your finances you need to prioritise. Our world is transforming 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 primary cause of bankruptcy in Australia today results 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 top cause of personal bankruptcy.
Obviously, this is an ongoing issue that must be addressed. Banks charge outrageous fees and interest charges for late credit card repayments, so if you’re already behind in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can aid those with credit card troubles. Seeking financial counselling is strongly encouraged to educate individuals how to plan and follow a budget.
Unemployment or loss of income remains to be one of the most contributing aspects of personal bankruptcy. This comes as no surprise since many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unplanned resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a steady source of income and depending only on Centrelink payments to remain solvent. The best way to manage an unpredicted loss of income is to be prepared, which showcases the importance of building an emergency fund that can assist you and your family for three to six months.
The third leading cause of personal bankruptcies in Australia comes from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems caused by divorces are common given the affiliated legal expenses, child support, and the rapid transition into a one-income household. Many folks end up inheriting debts from their partners or are unable to pay off existing credit because their costs have drastically increased.
Regardless of the reasons for your financial troubles, the fact remains that the sooner you seek financial help, the more possibilities will usually be available to you to resolve these issues. Many individuals grapple 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 Taree on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertstaree.com.au