5 Common Reasons Individuals Fall Into Personal Bankruptcy
By Administrator 30 September, 2014
Today, more and more individuals are falling into the black hole of financial hardship, accumulating their debts to a level whereby they are unable to repay their creditors and are officially declared bankrupt. With 29,514 personal bankruptcies having been declared in Australia between 2013 and 2014, it is increasingly important for individuals to be aware of their finances and work to prevent bankruptcy from occurring.
So, we’ve done our research and present to you the five most common causes of bankruptcy, and how you can prevent yourself from falling into your own personal bankruptcy:
A study done at Harvard University indicates that the accumulation of medical costs is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. When one encounters an unexpected and serious injury, this may rapidly result in hundreds or thousands of dollars in medical fees, often draining one’s savings. But with a recent study showing that 78% of individuals who filed for personal bankruptcy in fact were insured, this crushes the common myth regarding the belief that having medical insurance would prevent such financial circumstances.
Job Loss and Unemployment
For many, an unexpected termination or resignation may leave them in murky financial waters. If one hadn’t saved appropriately beforehand or weren’t lucky enough to be receiving severance packages or payouts, this may worsen the situation and lead to disastrous outcomes accounting for 22% of bankruptcy filings.
Uncontrolled Credit Use
Statistics show that 15% of bankruptcies are caused by the exhaustion of one’s credit cards. If one is constantly paying for groceries, clothes and bills on credit, these costs will rapidly add up until they’ve reached the point where the spender is unable to make even the minimum payment required.
With divorce rates on the rise, so are the associated costs. Between the struggles of legal fees, child support and the sudden transition into a one-income household, it comes as no surprise that divorce justifies 8% of all personal bankruptcies.
Whether it may be a family death, a natural disaster or a household robbery, the impact of an unexpected disaster on one’s financial savings is tremendous. The cost of funerals, replacements, insurance or relocation of homes may see the depletion of accounts, leaving victims unable to cover their basic expenses and find themselves buried in debt.
To prevent yourself from bankruptcy, be aware of the signs and be proactive in your financial activities:
- Establish an appropriate minimum saving plan.
- Be aware of your job security.
- Limit the amount of purchases you make on credit.
- Aim to pay off debts as quickly as possible.
If you are concerned about personal bankruptcy, call the experts today on 1800 676 598. We operate a 24 hour / 7 days a week advice line. We can give you in-depth advice on how bankruptcy might affect you and your family.
All calls are free, entirely confidential and if required, anonymous.