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:

1. Medical Expenses

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.

2. 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.

3. 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.

4. Divorce

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.

5. Unexpected Disaster

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.

It is one of the worst feelings in the world. The feeling of helplessness mixed with worry and embarrassment can be damaging to your mental health so don’t ignore these debt warning signs

• Do you struggle to make the repayments each month?

• Do you miss deadlines which results in late payment fees and penalty interest rates?

• Do you receive overdue account letters?

• Has your account been suspended or cancelled?

If you experience any of these warning signs then your debts have most likely already spiralled out of control. If this is the case then you need expert advice & assistance now – do not ignore these warning signs!

How can you lose your home?

If you are forced into bankruptcy due to an unpaid credit card debt then you risk losing your home – it is that simple! Your Trustee in Bankruptcy will take steps to sell your house if you have equity in it.

How can you save your home?

The most likely outcome is that you will lose your home if you become bankrupt. If you own a home and you wish to file for bankruptcy you may be able to sell the house to your spouse (as long as your interest in the house is sold for proper market value). Do not sell your home or any other property without first obtaining independent legal advice and a market valuation for your home. Selling your house at a value which is below market can be “attacked” and “overturned” by a Trustee in Bankruptcy.

If your spouse cannot raise the funds to purchase the equity in the home then you may wish to consider a Debt Agreement or a Personal Insolvency Agreement.

If you enter into either agreement, you will be able to keep your home.

To speak to one of our specialist debt consultants regarding please call us on 1800 676 598. We operate a 24 hour / 7 days a week advice line and calls to our hotline are confidential and if required, anonymous.

You need to act decisively to save your home.