No one wants to consider bankruptcy, which is understandable since bankruptcy will impact your financial condition for 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 general misunderstanding that bankruptcy is the only way to settle their financial dilemmas. Unfortunately, this isn’t the case as there are many solutions available to those dealing with financial difficulties. What many people don’t know is the sooner they act, the more possibilities will be typically be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter showing an 8% surge in the amount of bankruptcies proceedings than the last year. In reality, the September 2017 quarter was the ninth consecutive quarter wherein 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% in February 2018. Whilst the unemployment rates aren’t exemplary, it’s hovering around average levels which certainly wouldn’t lead to an 8% increase in the amount of personal bankruptcies. So, just 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 factors of your finances you need to prioritise. Our world is shifting rapidly and discovering 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 top cause of bankruptcy in Australia today arises from excessive use of credit. This is notable, considering that it is the very first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the top cause of personal bankruptcy.
Undoubtedly, this is an ongoing issue that has to 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 lots of online resources that can aid those with credit card troubles. Seeking financial counselling is strongly encouraged to show individuals how to plan and stick to 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 encounter an unforeseen resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a stable source of income and relying only on Centrelink payments to remain solvent. The best way to handle an unforeseen loss of income is to be prepared, which accentuates the importance of developing an emergency fund that can assist you and your family for three to six months.
The third greatest cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are continuously 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 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 expenses have greatly increased.
Regardless of the reasons for your financial challenges, 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 people grapple 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 Emerald on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertsemerald.com.au