Nobody wants to look into bankruptcy, which is easy to understand given that bankruptcy will bear upon your financial condition for several years to come. This may be one of the reasons why people don’t seek financial assistance in times of need, because they are under the common misunderstanding that bankruptcy is the only way to resolve their financial complications. Sadly, this isn’t the case as there are many possibilities available to those coping with financial difficulties. What most people 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 increase again, with the September 2017 quarter showing an 8% increase in the amount of bankruptcies proceedings than the previous year. As a matter of fact, the September 2017 quarter was the ninth continuous quarter where the amount 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. While the unemployment numbers aren’t exemplary, it’s hovering around average levels which surely wouldn’t bring about 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 wrestling with any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what areas of your finances you have to prioritise. Our world is shifting quickly and pinpointing new risks in your own financial situation will help 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 leading cause of bankruptcy in Australia today arises from excessive use of credit. This is exceptional, considering that it is the first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the greatest cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that should be addressed. Banks charge exorbitant 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 concerns. 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 doesn’t come as a suprise since 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 currently at 5.6%, this leaves many Australians without a steady flow of income and depending only on Centrelink payments to continue to be solvent. The best way to deal with an unplanned loss of income is to be prepared, which emphasises the importance of building an emergency fund that can assist you and your family for 3 to 6 months.
The third largest cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are continuously 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 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 dramatically increased.
Regardless of the reasons for your financial issues, the fact remains that the sooner you seek financial help, the more possibilities will generally 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. Call the professionals at Bankruptcy Experts Lismore on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertslismore.com.au