Nobody likes to consider bankruptcy, which is easy to understand considering that bankruptcy will have an effect on your financial circumstance for years to come. This may be one of the reasons why a lot of people don’t look for financial guidance in times of need, because they are under the typical misunderstanding that bankruptcy is the only way to manage their financial complications. Unfortunately, this isn’t the case as there are many choices available to those experiencing financial difficulties. What many people don’t know is the sooner they act, the more solutions will be typically be available to them.
In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter indicating an 8% growth in the number of bankruptcies proceedings than the prior year. In fact, the September 2017 quarter was the ninth consecutive quarter where 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 stable at 5.6% as of February 2018. Although the unemployment figures aren’t ideal, it’s floating around average levels which certainly wouldn’t bring about an 8% increase in the number of personal bankruptcies. So, just what has caused 4,236 people to file for bankruptcy in the September 2017 quarter?
If you’re dealing with any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what aspects of your finances you have to prioritise. Our world is changing dramatically and pinpointing new risks in your own financial scenario 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 greatest cause of bankruptcy in Australia today results from excessive use of credit. This is remarkable, considering that it is the first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the greatest cause of personal bankruptcy.
Evidently, this is an ongoing issue that ought to be addressed. Banks charge excessive fees and interest charges for late credit card repayments, so if you’re already behind 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 concerns. Seeking financial counselling is strongly advised to teach 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 because many Australian’s don’t have income insurance or an emergency fund which they can use if they face an unforeseen termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a reliable source of income and depending only on Centrelink payments to remain solvent. The best way to deal with an unexpected loss of income is to be prepared, which accentuates the importance of building an emergency fund that can assist you and your family for three to six months.
The third leading cause of personal bankruptcies in Australia derives 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 affiliated legal fees, child support, and the rapid transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are incapable of paying off existing credit because their costs have substantially increased.
Irrespective of the reasons for your financial issues, the fact remains that the sooner you seek financial support, the more opportunities will typically be available to you to resolve these issues. Lots of folks wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Call the professionals at Bankruptcy Experts Gosford on 1300 795 575, or alternatively visit our website for additional information: www.bankruptcyexpertsgosford.com.au