November 19th, 2018

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Top 3 Reasons For Personal Bankruptcy in Australia

Nobody wants to look into bankruptcy, which is easy to understand given that bankruptcy will influence your financial circumstance for several years to follow. This may be one of the reasons why lots of people don’t seek financial guidance in times of need, because they are under the common misunderstanding that bankruptcy is the only way to manage their financial problems. Unfortunately, this isn’t the case as there are many choices available to those coping with financial difficulties. What lots of people don’t understand is the sooner they act, the more solutions will be typically be available to them.

In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter showing an 8% increase in the number of bankruptcies proceedings than the prior year. In truth, the September 2017 quarter was the ninth successive quarter wherein the number of debt agreements increased. Like me, you might be wondering why?

Well, the economy is doing fine with interest rates still at record lows and unemployment steady at 5.6% in February 2018. Even though the unemployment statistics aren’t optimal, it’s hovering around average levels which certainly wouldn’t cause an 8% increase in the amount of personal bankruptcies. So, just what has caused 4,236 people to file for bankruptcy in the September 2017 quarter?

If you’re wrestling with 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 shifting quickly and pinpointing new risks in your own financial scenario will allow 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 arises from excessive use of credit. This is exceptional, since it is the very first time since data collection began 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 ought to be addressed. Banks charge enormous fees and interest charges for late credit card repayments, so if you’re already overdue in your credit card repayments, take action now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has lots of online resources that can help those with credit card problems. Seeking financial counselling is strongly recommended to educate individuals how to plan and stick to a budget.

Unemployment

Unemployment or loss of income continues to be one of the most contributing elements of personal bankruptcy. This comes as no surprise given that many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unplanned termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a regular flow of income and depending only on Centrelink payments to remain solvent. The best way to manage an unpredicted loss of income is to be prepared, which highlights the importance of creating an emergency fund that can assist you and your family for 3 to 6 months.

Relationship breakdowns

The third greatest cause of personal bankruptcies in Australia originates from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems arising from divorces are common given the associated legal costs, child support, and the swift transition into a one-income household. Many people find themselves inheriting debts from their partners or are incapable of paying off existing credit because their costs have significantly increased.

Looking ahead

Regardless of the reasons for your financial problems, the fact remains that the sooner you seek financial support, the more possibilities 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. Call the specialists at Bankruptcy Experts Canberra on 1300 795 575, or alternatively visit our website for more information: www.bankruptcyexpertscanberra.com.au