June 25, 2018 43

Top 3 Reasons For Personal Bankruptcy in Australia

Posted by:Charles Bosse onJune 25, 2018

Nobody wants to contemplate bankruptcy, which is understandable since bankruptcy will affect your financial circumstance for several years to come. This may be one of the reasons why lots of people don’t seek financial assistance in times of need, because they are under the popular misconception that bankruptcy is the only way to resolve their financial complications. Unfortunately, this isn’t the case as there are many solutions available to those dealing with financial difficulties. What many people don’t recognise is the sooner they act, the more solutions will be generally be available to them.

In Australia, personal bankruptcies are on the climb again, with the September 2017 quarter indicating an 8% surge in the amount of bankruptcies cases than the preceding year. In truth, the September 2017 quarter was the ninth consecutive quarter in which 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 stable at 5.6% as of February 2018. Whilst the unemployment statistics aren’t great, it’s floating around average levels which certainly wouldn’t induce 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 dealing with any financial distress, 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 rapidly and recognising new risks in your own financial scenario will help you to proactively manage them. To give you some insight, here are the top 3 causes of personal bankruptcy in Australia in 2017.

Excessive use of credit

The primary cause of bankruptcy in Australia today results from excessive use of credit. This is remarkable, since it is the first time since data collection began in 2007-08 that excessive use of credit has surpassed unemployment as the primary cause of personal bankruptcy.

Evidently, 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 currently overdue 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 assist those with credit card concerns. Seeking financial guidance is strongly advised to show individuals how to plan and follow a budget.

Unemployment

Unemployment or loss of income remains to be one of the most contributing elements of personal bankruptcy. This doesn’t come as a suprise given that many Australian’s don’t have income insurance or an emergency fund which they can use if they experience an unforeseen resignation or termination. With unemployment rates currently at 5.6%, this leaves many Australians without a reliable income source and relying only on Centrelink payments to remain solvent. The best way to tackle an unforeseen loss of income is to be prepared, which emphasises the importance of putting together 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 originates from relationship breakdowns. Divorce rates are continuously increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems caused by divorces are common given the associated legal expenses, child support, and the rapid transition into a one-income household. Many folks end up inheriting debts from their partners or are incapable of paying off existing credit because their expenses have substantially increased.

Looking ahead

Irrespective of the reasons for your financial challenges, the fact remains that the sooner you seek financial support, the more prospects will typically 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. Phone the professionals at Fresh Start Solutions Hobart on 1300 818 575, or alternatively visit our website for further information: https://freshstartsolutions.com.au/bankruptcy-hobart

 

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