June 25, 201822

Top 3 Reasons For Personal Bankruptcy in Australia

Posted by:Charles Bosse onJune 25, 2018

No one wants to consider bankruptcy, which is easy to understand considering that bankruptcy will influence your financial condition for several years to come. This may be one of the reasons why people don’t seek financial help in times of need, because they are under the general misunderstanding that bankruptcy is the only way to resolve their financial issues. Sadly, this isn’t the case as there are many opportunities available to those coping with financial difficulties. What most individuals don’t understand is the sooner they act, the more opportunities will be generally be available to them.

In Australia, personal bankruptcies are on the rise again, with the September 2017 quarter recording an 8% increase in the number of bankruptcies proceedings than the previous year. In reality, the September 2017 quarter was the ninth consecutive quarter in which the amount of debt agreements increased. Like me, you may be 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. Although the unemployment rates aren’t ideal, it’s floating around average levels which certainly wouldn’t lead to an 8% increase in the number 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 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 rapidly and discovering new risks in your own financial situation 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 top cause of bankruptcy in Australia today results from excessive use of credit. This is exceptional, given that it is the first time since data collection started in 2007-08 that excessive use of credit has surpassed unemployment as the leading cause of personal bankruptcy.

Clearly, this is an ongoing issue that ought to be addressed. Banks charge extravagant fees and interest charges for late credit card repayments, so if you’re currently overdue in your credit card repayments, act now. The Government’s MoneySmart website (https://www.moneysmart.gov.au) has plenty of online resources that can aid those with credit card issues. Seeking financial guidance is strongly recommended to teach 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 comes as no surprise given that many Australian’s don’t have income insurance or an emergency fund which they can use if they experience an unforeseen termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a reliable source of income and relying only on Centrelink payments to remain solvent. The best way to deal with an unanticipated loss of income is to be prepared, which accentuates the importance of building an emergency fund that can support you and your family for 3 to 6 months.

Relationship breakdowns
The third biggest cause of personal bankruptcies in Australia originates 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 resulting from divorces are common given the affiliated legal costs, child support, and the abrupt 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 costs have drastically increased.

Looking ahead
Regardless of the reasons for your financial troubles, the fact remains that the sooner you seek financial guidance, the more opportunities will generally be available to you to resolve these issues. Lots of people wrestle with debt for years before seeking help. If you’re juggling your finances and avoiding phone calls, don’t wait any longer. Get in contact with the specialists at Fresh Start Solutions on 1300 818 575, or alternatively visit our website for more information: https://freshstartsolutions.com.au

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