June 25, 2018 0

Top 3 Causes of Personal Bankruptcy in Australia

Posted by:Charles Bosse onJune 25, 2018

Nobody wants to think about bankruptcy, which is easy to understand given that bankruptcy will alter your financial situation for years to come. This may be one of the reasons why many people don’t seek financial help in times of need, because they are under the popular misunderstanding that bankruptcy is the only way to address their financial concerns. Sadly, this isn’t the case as there are many choices available to those coping with financial difficulties. What most individuals don’t know is the sooner they act, the more possibilities will be generally be available to them.

In Australia, personal bankruptcies are on the upswing again, with the September 2017 quarter marking an 8% increase in the number of bankruptcies proceedings than the last year. In fact, 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 record lows and unemployment steady at 5.6% in February 2018. Although the unemployment figures aren’t exemplary, it’s hovering around average levels which undoubtedly wouldn’t trigger 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 confronting any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what elements of your finances you need to prioritise. Our world is evolving dramatically and recognising new risks in your own financial scenario 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 primary cause of bankruptcy in Australia today arises from excessive use of credit. This is notable, given that it is the very first time since data collection began in 2007-08 that excessive use of credit has taken over unemployment as the greatest cause of personal bankruptcy.

Unmistakably, this is an ongoing issue that needs to be addressed. Banks charge extravagant 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 lots of online resources that can aid those with credit card troubles. Seeking financial counselling is highly advised to educate individuals how to plan and follow a budget.

Unemployment

Unemployment or loss of income remains to be one of the most contributing aspects of personal bankruptcy. This doesn’t come as a suprise considering that many Australian’s don’t have income insurance or an emergency fund which they can use if they endure an unexpected resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a steady income source and depending only on Centrelink payments to continue being solvent. The best way to handle an unpredicted loss of income is to be prepared, which highlights the importance of developing an emergency fund that can assist you and your family for three to six months.

Relationship breakdowns

The third greatest cause of personal bankruptcies in Australia derives from relationship breakdowns. Divorce rates are gradually increasing, with the ABS recording 46,604 divorces in 2016. Even though divorces are not uncommon, financial problems resulting from divorces are common given the associated legal costs, child support, and the swift transition into a one-income household. Many people end up inheriting debts from their partners or are unable to pay off existing credit because their costs have substantially increased.

Looking ahead

Regardless of the reasons for your financial issues, the fact remains that the sooner you seek financial support, the more prospects 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 to the professionals at Fresh Start Solutions Darwin on 1300 818 575, or alternatively visit our website for additional information: https://freshstartsolutions.com.au/bankruptcy-darwin

 

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