Nobody wants to contemplate bankruptcy, which is easy to understand given that bankruptcy will affect your financial situation 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 popular misunderstanding that bankruptcy is the only way to work out their financial issues. Sadly, this isn’t the case as there are many possibilities available to those experiencing financial difficulties. What lots of people don’t recognise is the sooner they act, the more choices will be typically be available to them.
In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter marking an 8% surge in the amount of bankruptcies cases than the preceding year. In reality, the September 2017 quarter was the ninth continuous quarter in which the amount 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. While the unemployment rates aren’t great, it’s hovering around average levels which definitely 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 confronting any financial distress, understanding the top causes of personal bankruptcy will give you awareness into what factors of your finances you need to prioritise. Our world is shifting dramatically and pinpointing new risks in your own financial scenario will allow you to proactively address them. To give you some insight, here are the top 3 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, since it is the first time since data collection started in 2007-08 that excessive use of credit has taken over unemployment as the number one cause of personal bankruptcy.
Evidently, this is an ongoing issue that should 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, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can assist those with credit card problems. Seeking financial guidance is strongly advised to teach individuals how to plan and follow a budget.
Unemployment or loss of income continues to be one of the most contributing factors 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 encounter an unanticipated termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a regular income source and depending only on Centrelink payments to continue to be solvent. The best way to deal with an unexpected loss of income is to be prepared, which accentuates the importance of developing 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. While divorces are not uncommon, financial problems caused by divorces are common given the affiliated legal costs, child support, and the swift transition into a one-income household. Many individuals find themselves inheriting debts from their partners or are unable to pay off existing credit because their expenses have dramatically increased.
Irrespective of the reasons for your financial troubles, the fact remains that the sooner you seek financial guidance, the more opportunities will usually be available to you to resolve these issues. Many individuals wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Speak with the specialists at Bankruptcy Experts Mackay on 1300 795 575, or alternatively visit our website for further information: www.bankruptcyexpertsmackay.com.au