No one likes to consider bankruptcy, which is understandable given that bankruptcy will disturb your financial condition for several years to come. This may be one of the reasons why individuals don’t look for financial help in times of need, because they are under the common misconception that bankruptcy is the only way to settle their financial issues. Sadly, this isn’t the case as there are many alternatives available to those coping with financial difficulties. What most individuals don’t understand is the sooner they act, the more choices will be typically be available to them.
In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter indicating an 8% increase in the amount of bankruptcies proceedings than the previous year. In reality, the September 2017 quarter was the ninth consecutive quarter wherein the number of debt agreements increased. Like me, you are perhaps 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. Even though the unemployment figures aren’t ideal, it’s hovering around average levels which undoubtedly wouldn’t induce 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 grappling any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what components of your finances you have to prioritise. Our world is changing quickly and discovering new risks in your own financial scenario 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 leading cause of bankruptcy in Australia today results from excessive use of credit. This is remarkable, considering that it is the very first time since data collection began in 2007-08 that excessive use of credit has overtaken unemployment as the top cause of personal bankruptcy.
Clearly, this is an ongoing issue that needs to be addressed. Banks charge excessive fees and interest charges for late credit card repayments, so if you’re currently behind in your credit card repayments, do something about it now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has loads of online resources that can aid those with credit card troubles. Seeking financial counselling is strongly advised to show individuals how to plan and stick to a budget.
Unemployment or loss of income continues to be one of the most contributing factors of personal bankruptcy. This comes as no surprise considering that many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unexpected termination or resignation. With unemployment rates presently at 5.6%, this leaves many Australians without a steady source of income and relying only on Centrelink payments to continue to be solvent. The best way to handle an unpredicted loss of income is to be prepared, which emphasises the importance of building an emergency fund that can assist you and your family for 3 to 6 months.
The third biggest cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems caused by divorces are common given the associated legal costs, child support, and the abrupt 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 expenditures have drastically increased.
Regardless of the reasons for your financial difficulties, the fact remains that the sooner you seek financial guidance, the more opportunities will usually be available to you to resolve these issues. Lots of individuals wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Get in contact with the specialists at Bankruptcy Experts Tennant Creek on 1300 795 575, or alternatively visit our website for more information: Bankrupt Tennantcreek