No one likes to think about bankruptcy, which is easy to understand since bankruptcy will affect your financial condition for several years to come. This may be one of the reasons why a lot of people don’t seek financial guidance in times of need, because they are under the general misunderstanding that bankruptcy is the only way to fix their financial dilemmas. Sadly, this isn’t the case as there are many choices available to those coping with financial difficulties. What many 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 climb again, with the September 2017 quarter showing an 8% surge in the number of bankruptcies proceedings than the prior year. In truth, the September 2017 quarter was the ninth consecutive quarter wherein the number of debt agreements increased. Like me, you may be wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment steady at 5.6% in February 2018. Although the unemployment rates aren’t ideal, it’s floating around average levels which undoubtedly wouldn’t bring about an 8% increase in the amount of personal bankruptcies. So, exactly what 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 changing quickly and pinpointing new risks in your own financial scenario will allow 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 results from excessive use of credit. This is exceptional, since it is the first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the greatest cause of personal bankruptcy.
Clearly, this is an ongoing issue that needs to be addressed. Banks charge enormous fees and interest charges for late credit card repayments, so if you’re already overdue 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 troubles. Seeking financial counselling is strongly encouraged to educate 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 experience an unanticipated termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a regular flow of income and depending only on Centrelink payments to remain solvent. The best way to manage an unexpected loss of income is to be prepared, which emphasises the importance of establishing an emergency fund that can assist you and your family for 3 to 6 months.
The third largest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems resulting from divorces are common given the affiliated legal expenses, child support, and the swift transition into a one-income household. Many people end up inheriting debts from their partners or are not able to pay off existing credit because their expenses have significantly increased.
Regardless of the reasons for your financial challenges, the fact remains that the sooner you seek financial assistance, the more possibilities will typically be available to you to resolve these issues. Lots of folks grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Contact the specialists at Bankruptcy Experts Parramatta on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertsparramatta.com.au