June 25, 2018 0

Top 3 Reasons For Personal Bankruptcy in Australia

Posted by:Charles Bosse onJune 25, 2018

No one likes to look into bankruptcy, which is easy to understand considering that bankruptcy will have an effect on your financial situation for several years to follow. This may be one of the reasons why many people don’t seek financial help in times of need, because they are under the general misconception that bankruptcy is the only way to manage their financial issues. Unfortunately, this isn’t the case as there are many solutions available to those coping with financial difficulties. What many people don’t understand 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 marking an 8% surge in the number of bankruptcies cases than the prior year. In reality, the September 2017 quarter was the ninth consecutive 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 an all-time low and unemployment stable at 5.6% in February 2018. Although the unemployment figures aren’t optimal, it’s hovering around average levels which undoubtedly wouldn’t bring about an 8% increase in the number of personal bankruptcies. So, what exactly has caused 4,236 people to file for bankruptcy in the September 2017 quarter?

If you’re confronting any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what areas of your finances you have to prioritise. Our world is shifting dramatically and recognising new risks in your own financial situation 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 number one cause of bankruptcy in Australia today comes from excessive use of credit. This is remarkable, given that it is the first time since data collection started in 2007-08 that excessive use of credit has taken over unemployment as the top cause of personal bankruptcy.

Naturally, 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 plenty of online resources that can aid those with credit card problems. Seeking financial counselling is strongly encouraged to educate individuals how to plan and stick to a budget.

Unemployment

Unemployment or loss of income remains to be one of the most contributing factors of personal bankruptcy. This comes as no surprise considering that many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unanticipated resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a stable flow of income and relying only on Centrelink payments to remain solvent. The best way to manage an unforeseen loss of income is to be prepared, which emphasises the importance of setting up an emergency fund that can assist you and your family for three to six months.

Relationship breakdowns

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. Even though divorces are not uncommon, financial problems arising from divorces are common given the accompanying legal costs, child support, and the rapid 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 expenditures have substantially increased.

Looking ahead

Regardless of the reasons for your financial difficulties, the fact remains that the sooner you seek financial guidance, the more prospects will usually be available to you to resolve these issues. Lots of folks grapple with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Contact the professionals at Fresh Start Solutions Sydney on 1300 818 575, or alternatively visit our website for more information: http://freshstartsolutions.com.au/bankruptcy-sydney

 

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