No one likes to contemplate bankruptcy, which is understandable considering that bankruptcy will disturb your financial situation for several years to come. This may be one of the reasons why people don’t look for financial help in times of need, because they are under the typical misunderstanding that bankruptcy is the only way to fix their financial dilemmas. Sadly, this isn’t the case as there are many opportunities available to those coping with financial difficulties. What most people don’t understand is the sooner they act, the more possibilities will be typically be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter showing an 8% growth in the number of bankruptcies cases than the last year. In truth, the September 2017 quarter was the ninth consecutive quarter where 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 stable at 5.6% as of February 2018. While the unemployment numbers aren’t optimal, it’s hovering around average levels which definitely wouldn’t cause an 8% increase in the amount 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 elements of your finances you have to prioritise. Our world is transforming quickly and identifying new risks in your own financial situation 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 number one cause of bankruptcy in Australia today arises from excessive use of credit. This is notable, given that it is the very first time since data collection began in 2007-08 that excessive use of credit has superseded unemployment as the leading cause of personal bankruptcy.
Unmistakably, this is an ongoing issue that ought to be addressed. Banks charge enormous fees and interest charges for late credit card repayments, so if you’re already behind in your credit card repayments, take action 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 strongly advised 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 comes as no surprise since many Australian’s don’t have income insurance or an emergency fund which they can use if they encounter an unanticipated resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a stable source of income and depending only on Centrelink payments to remain solvent. The best way to tackle an unforeseen loss of income is to be prepared, which accentuates the importance of developing an emergency fund that can support you and your family for 3 to 6 months.
The third biggest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. Even though divorces are not uncommon, financial problems caused by divorces are common given the associated legal fees, child support, and the swift transition into a one-income household. Many people end up inheriting debts from their partners or are unable to pay off existing credit because their costs have greatly increased.
Regardless of the reasons for your financial challenges, the fact remains that the sooner you seek financial assistance, the more options will generally 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. Get in contact with the specialists at Bankruptcy Experts Cairns on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertscairns.com.au