Top 3 Causes of Personal Bankruptcy in Australia

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No one wants to look into bankruptcy, which is understandable since bankruptcy will alter your financial condition for years to follow. This may be one of the reasons why many people don’t look for financial assistance in times of need, because they are under the general misunderstanding that bankruptcy is the only way to settle 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 recognise is the sooner they act, the more alternatives will be generally be available to them.

In Australia, personal bankruptcies are on the increase again, with the September 2017 quarter marking an 8% surge in the number of bankruptcies cases than the previous year. In truth, the September 2017 quarter was the ninth continuous quarter where the number of debt agreements increased. Like me, you are perhaps wondering why?

Well, the economy is doing fine with interest rates still at an all-time low and unemployment stable at 5.6% as of February 2018. Although the unemployment numbers aren’t exemplary, it’s hovering around average levels which certainly wouldn’t bring about an 8% increase in the number of personal bankruptcies. So, just what has caused 4,236 people to declare bankruptcy in the September 2017 quarter?

If you’re grappling any financial hardship, understanding the top causes of personal bankruptcy will give you awareness into what components of your finances you have to prioritise. Our world is evolving rapidly and discovering new risks in your own financial circumstance will enable 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 exceptional, since it is the first time since data collection began in 2007-08 that excessive use of credit has overtaken unemployment as the greatest cause of personal bankruptcy.

Evidently, this is an ongoing issue that should be addressed. Banks charge exorbitant 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 ( has lots of online resources that can aid those with credit card concerns. Seeking financial guidance is strongly advised to show individuals how to plan and stick to a budget.


Unemployment or loss of income remains to be one of the most contributing aspects of personal bankruptcy. This doesn’t come as a suprise since many Australian’s don’t have income insurance or an emergency fund which they can use if they experience an unanticipated termination or resignation. With unemployment rates currently at 5.6%, this leaves many Australians without a reliable flow of income and relying only on Centrelink payments to remain solvent. The best way to handle an unforeseen loss of income is to be prepared, which highlights the importance of building an emergency fund that can support you and your family for 3 to 6 months.

Relationship breakdowns

The third largest cause of personal bankruptcies in Australia stems from relationship breakdowns. Divorce rates are steadily increasing, with the ABS recording 46,604 divorces in 2016. Although divorces are not uncommon, financial problems resulting from divorces are common given the accompanying legal costs, child support, and the abrupt transition into a one-income household. Many folks end up inheriting debts from their partners or are not able to pay off existing credit because their costs have significantly increased.

Looking ahead

Irrespective of the reasons for your financial issues, the fact remains that the sooner you seek financial assistance, the more options will usually be available to you to resolve these issues. Many individuals 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 touch with the specialists at Bankruptcy Experts Penrith on 1300 795 575, or alternatively visit our website for further information:


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