No one likes to think about bankruptcy, which is understandable considering that bankruptcy will bear upon your financial condition for years to follow. This may be one of the reasons why many people don’t seek financial help in times of need, because they are under the popular misunderstanding that bankruptcy is the only way to fix their financial dilemmas. Unfortunately, this isn’t the case as there are many solutions available to those facing financial difficulties. What most people don’t know is the sooner they act, the more possibilities will be generally be available to them.
In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter recording an 8% surge in the number of bankruptcies proceedings than the last year. In fact, the September 2017 quarter was the ninth continuous 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% as of February 2018. Even though the unemployment numbers aren’t ideal, it’s floating around average levels which definitely wouldn’t lead to 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 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 transforming quickly and discovering new risks in your own financial circumstance 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 top cause of bankruptcy in Australia today results from excessive use of credit. This is notable, since it is the very first time since data collection started in 2007-08 that excessive use of credit has superseded unemployment as the top cause of personal bankruptcy.
Evidently, this is an ongoing issue that should 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, do something about it now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can help those with credit card troubles. Seeking financial counselling is highly encouraged to show 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 since many Australian’s don’t have income insurance or an emergency fund which they can use if they experience an unexpected termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a stable flow of income and depending only on Centrelink payments to remain solvent. The best way to deal with an unanticipated loss of income is to be prepared, which showcases the importance of creating an emergency fund that can assist you and your family for 3 to 6 months.
The third leading cause of personal bankruptcies in Australia comes from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Whilst divorces are not uncommon, financial problems resulting from divorces are common given the associated legal fees, child support, and the swift transition into a one-income household. Many people find themselves 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 help, the more possibilities will generally be available to you to resolve these issues. Lots of individuals grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Talk with the specialists at Bankruptcy Experts Darwin on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertsdarwin.com.au