Nobody likes to look into bankruptcy, which is easy to understand considering that bankruptcy will have an effect on your financial condition for several 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 typical misconception that bankruptcy is the only way to resolve their financial issues. Unfortunately, this isn’t the case as there are many options available to those facing financial difficulties. What lots of people don’t know is the sooner they act, the more alternatives will be generally be available to them.
In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter recording an 8% increase in the number of bankruptcies cases than the prior year. In reality, 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% in February 2018. Although the unemployment rates aren’t ideal, it’s floating around average levels which definitely wouldn’t bring about 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 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 transforming quickly and recognising new risks in your own financial circumstance will enable 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 comes from excessive use of credit. This is remarkable, since it is the very first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the number one cause of personal bankruptcy.
Obviously, this is an ongoing issue that must be addressed. Banks charge enormous 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 lots of online resources that can aid those with credit card concerns. Seeking financial counselling is highly encouraged to show 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 unanticipated resignation or termination. With unemployment rates presently at 5.6%, this leaves many Australians without a regular flow of income and relying only on Centrelink payments to continue to be solvent. The best way to deal with an unforeseen 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 largest cause of personal bankruptcies in Australia comes from relationship breakdowns. Divorce rates are progressively increasing, with the ABS recording 46,604 divorces in 2016. Whilst divorces are not uncommon, financial problems resulting from divorces are common given the accompanying legal costs, child support, and the sudden transition into a one-income household. Many individuals end up inheriting debts from their partners or are not able to pay off existing credit because their costs have substantially 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. Many individuals grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Talk with the specialists at Bankruptcy Experts Mildura on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertsmildura.com.au