No one likes to look into bankruptcy, which is easy to understand since bankruptcy will have an effect on your financial circumstance for years to follow. This may be one of the reasons why individuals don’t look for financial guidance in times of need, because they are under the common misconception that bankruptcy is the only way to fix their financial issues. Unfortunately, this isn’t the case as there are many alternatives available to those coping with financial difficulties. What most people don’t understand is the sooner they act, the more opportunities will be typically be available to them.
In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter marking an 8% surge in the amount of bankruptcies cases than the prior year. In truth, the September 2017 quarter was the ninth successive quarter in which the amount of debt agreements increased. Like me, you may be 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. Although the unemployment numbers aren’t great, it’s floating around average levels which certainly wouldn’t lead to 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 dealing with any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what elements of your finances you should prioritise. Our world is evolving quickly and discovering new risks in your own financial situation 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 number one 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 surpassed unemployment as the top cause of personal bankruptcy.
Clearly, this is an ongoing issue that needs to be addressed. Banks charge outrageous fees and interest charges for late credit card repayments, so if you’re currently overdue in your credit card repayments, do something about it now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can assist those with credit card issues. Seeking financial counselling is highly 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 comes as no surprise 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 steady flow of income and relying only on Centrelink payments to remain solvent. The best way to tackle an unpredicted loss of income is to be prepared, which emphasises the importance of setting up an emergency fund that can support you and your family for three to six months.
The third leading cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems resulting from divorces are common given the affiliated legal fees, child support, and the abrupt transition into a one-income household. Many people find themselves inheriting debts from their partners or are not able to pay off existing credit because their costs have greatly increased.
Irrespective of the reasons for your financial troubles, the fact remains that the sooner you seek financial guidance, the more opportunities will generally be available to you to resolve these issues. Lots of people grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Get in touch with the specialists at Bankruptcy Experts Shepparton on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertsshepparton.com.au