Nobody wants to look into bankruptcy, which is easy to understand considering that bankruptcy will alter your financial situation for several years to come. This may be one of the reasons why people don’t look for financial guidance in times of need, because they are under the typical misconception that bankruptcy is the only way to address their financial dilemmas. Unfortunately, this isn’t the case as there are many options available to those coping with financial difficulties. What lots of people don’t understand is the sooner they act, the more options will be generally be available to them.
In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter showing an 8% surge in the number of bankruptcies cases than the last year. As a matter of fact, the September 2017 quarter was the ninth continuous quarter in which the number of debt agreements increased. Like me, you are perhaps wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment stable at 5.6% as of February 2018. Whilst the unemployment numbers aren’t exemplary, it’s floating around average levels which certainly 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 confronting any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what components of your finances you need to prioritise. Our world is evolving quickly and pinpointing new risks in your own financial scenario will enable 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 primary cause of bankruptcy in Australia today results from excessive use of credit. This is exceptional, given that it is the first time since data collection started in 2007-08 that excessive use of credit has taken over unemployment as the number one cause of personal bankruptcy.
Obviously, 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 behind 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 issues. Seeking financial guidance is strongly encouraged to teach individuals how to plan and follow a budget.
Unemployment or loss of income continues to be one of the most contributing elements 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 endure an unexpected termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a regular flow of income and relying only on Centrelink payments to remain solvent. The best way to cope with an unforeseen loss of income is to be prepared, which accentuates the importance of putting together an emergency fund that can support you and your family for three to six months.
The third largest cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Whilst divorces are not uncommon, financial problems resulting from divorces are common given the accompanying legal fees, 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 expenditures have drastically increased.
Irrespective of the reasons for your financial issues, the fact remains that the sooner you seek financial guidance, the more options 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 Fremantle on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertsfremantle.com.au