Nobody wants to contemplate bankruptcy, which is easy to understand given that bankruptcy will disturb your financial circumstance for several years to come. This may be one of the reasons why lots of people don’t seek financial guidance in times of need, because they are under the popular misconception that bankruptcy is the only way to manage their financial concerns. Sadly, this isn’t the case as there are many possibilities available to those dealing with financial difficulties. What many people don’t understand is the sooner they act, the more choices will be generally be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter indicating an 8% increase in the amount of bankruptcies proceedings than the preceding year. In truth, the September 2017 quarter was the ninth consecutive quarter in which the number of debt agreements increased. Like me, you might be wondering why?
Well, the economy is doing fine with interest rates still at an all-time low and unemployment steady at 5.6% as of February 2018. Although the unemployment statistics aren’t great, it’s hovering around average levels which certainly wouldn’t induce 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 confronting any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what factors of your finances you should prioritise. Our world is changing rapidly and identifying new risks in your own financial circumstance 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 arises from excessive use of credit. This is exceptional, considering that it is the very first time since data collection began in 2007-08 that excessive use of credit has superseded unemployment as the greatest cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that should be addressed. Banks charge exorbitant fees and interest charges for late credit card repayments, so if you’re currently behind in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has loads of online resources that can assist those with credit card problems. Seeking financial counselling is highly advised to educate 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 doesn’t come as a suprise because many Australian’s don’t have income insurance or an emergency fund which they can use if they experience an unforeseen resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a reliable income source and depending 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 building an emergency fund that can support 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 gradually increasing, with the ABS recording 46,604 divorces in 2016. While divorces are not uncommon, financial problems caused by divorces are common given the associated legal costs, child support, and the swift transition into a one-income household. Many people end up inheriting debts from their partners or are incapable of paying off existing credit because their costs have drastically increased.
Irrespective of the reasons for your financial problems, the fact remains that the sooner you seek financial help, the more prospects will usually 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. Reach out to the professionals at Bankruptcy Experts Northern Rivers on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsnorthernrivers.com.au