No one wants to consider bankruptcy, which is easy to understand since bankruptcy will alter your financial condition for years to follow. This may be one of the reasons why people don’t look for financial guidance in times of need, because they are under the general misunderstanding that bankruptcy is the only way to deal with their financial concerns. Unfortunately, this isn’t the case as there are many opportunities available to those facing 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 indicating an 8% surge in the number of bankruptcies proceedings than the previous year. In 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 an all-time low and unemployment stable at 5.6% in February 2018. Although the unemployment statistics aren’t optimal, it’s hovering around average levels which undoubtedly wouldn’t trigger an 8% increase in the number of personal bankruptcies. So, exactly what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?
If you’re dealing with any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what elements of your finances you should prioritise. Our world is transforming dramatically and pinpointing new risks in your own financial circumstance will help you to proactively address them. To give you some insight, here are the top three causes of personal bankruptcy in Australia in 2017.
Excessive use of credit
The greatest cause of bankruptcy in Australia today results from excessive use of credit. This is remarkable, given that it is the very first time since data collection started in 2007-08 that excessive use of credit has superseded unemployment as the greatest cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that has to be addressed. Banks charge outrageous 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 concerns. 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 aspects of personal bankruptcy. This doesn’t come as a suprise because many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unexpected termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a steady source of income and relying only on Centrelink payments to remain solvent. The best way to deal with an unexpected loss of income is to be prepared, which showcases the importance of creating an emergency fund that can assist you and your family for three to six months.
The third largest cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Whilst divorces are not uncommon, financial problems caused by divorces are common given the affiliated legal expenses, child support, and the swift transition into a one-income household. Many people find themselves inheriting debts from their partners or are incapable of paying off existing credit because their costs have drastically increased.
Irrespective of the reasons for your financial troubles, the fact remains that the sooner you seek financial support, the more opportunities will usually be available to you to resolve these issues. Many 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 with the professionals at Bankruptcy Experts Dubbo on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertsdubbo.com.au