Nobody wants to consider bankruptcy, which is understandable since bankruptcy will alter your financial condition for several years to follow. This may be one of the reasons why many people don’t look for financial support in times of need, because they are under the common misconception that bankruptcy is the only way to work out their financial problems. Unfortunately, this isn’t the case as there are many possibilities available to those coping with financial difficulties. What many people don’t understand is the sooner they act, the more choices will be typically be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter showing an 8% increase in the number of bankruptcies cases than the preceding year. In reality, the September 2017 quarter was the ninth consecutive quarter in which 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 steady at 5.6% as of February 2018. Whilst the unemployment figures aren’t exemplary, it’s floating around average levels which certainly wouldn’t cause an 8% increase in the amount of personal bankruptcies. So, exactly what has caused 4,236 people to file for 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 components of your finances you should prioritise. Our world is transforming dramatically and identifying new risks in your own financial situation will enable you to proactively address them. To give you some insight, here are the top 3 causes of personal bankruptcy in Australia in 2017.
Excessive use of credit
The greatest 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is remarkable, since it is the very first time since data collection began in 2007-08 that excessive use of credit has superseded unemployment as the primary cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that must be addressed. Banks charge extravagant fees and interest charges for late credit card repayments, so if you’re already overdue in your credit card repayments, take action now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can help those with credit card issues. Seeking financial counselling is highly recommended to teach individuals how to plan and stick to 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 considering that 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 presently at 5.6%, this leaves many Australians without a steady flow of income and relying only on Centrelink payments to remain solvent. The best way to manage an unforeseen loss of income is to be prepared, which emphasises the importance of putting together an emergency fund that can assist you and your family for 3 to 6 months.
The third largest cause of personal bankruptcies in Australia comes 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 arising from divorces are common given the accompanying legal costs, child support, and the swift transition into a one-income household. Many folks end up inheriting debts from their partners or are incapable of paying off existing credit because their expenditures have significantly increased.
Irrespective of the reasons for your financial challenges, the fact remains that the sooner you seek financial assistance, the more possibilities 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. Get in contact with the specialists at Bankruptcy Experts Wyong on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertswyong.com.au