Why do people go bankrupt?

Bankruptcy can affect anyone. Here at the Australian Bankruptcy Service we see and hear every day how quickly someone’s personal finances can spiral out of control when faced with a sudden financial shock. Our staff have carefully prepared the following list to warn people of the risk factors often involved in pushing someone towards bankruptcy. If any of the below apply to you we offer confidential free advice 24 hrs / 7 days a week.

Credit Card Debts

It seems to be the case that more and more people are happy to spend money that they do not have. Credit cards, with their high interest rates, often have the effect of sending people into a debt spiral which is difficult to get out of. The problem continually compounds itself, so that eventually a person may find themselves in a situation where they cannot even afford the minimum repayment, particularly if you have multiple credit cards. If the person cannot secure help from friends or family bankruptcy can eventually become inevitable. We are experts in helping people manage exactly this kind if crisis, so if you are experiencing significant problems related to credit card or personal loan debts, call our toll free advice and speak to an expert.

Job Loss

Unsurprisingly, the loss of a regular income greatly increases the chances of becoming insolvent which will eventually lead to bankruptcy. Whether this occurs as a result of voluntary resignation, or involuntary termination the speed in which loss of employment can cause damage on your finances should not be underestimated. A redundancy pay out can help in the short term (as most people get a financial payout) but if you have debt you need to spend that payout very wisely.

Divorce and Separation from a partner

When marriages or de facto relationships end, they can often put a huge financial strain on both parties. A couple with a double income is in a far more comfortable financial position than the two parties would be on their own, as many costs, including accommodation & essential services (like electricity, telephone & water costs) are shared. A divorce brings with it many extra costs, including the initial legal fees, a division of marital assets as well as child support payments. The process will in most cases put a significant strain on the household budget and can lead to reliance on credit cards to pay essential living costs. If this process isn’t controlled carefully it can lead to bankruptcy.

Unexpected Expenses

There is a whole range of unexpected occurrences that can culminate in bankruptcy.

  • Natural disasters
  • Property theft
  • Spousal death
  • Medical issues

These are just some examples of the unsavoury events that may force a person into bankruptcy. People often assume that the various insurance policies they have taken out over the years will cover them in the face of some of these events, later to find that they will not. A flood, for example, is often not covered, and leaves a person without a home or furnishings.

Ultimately, there are many things that can cause bankruptcy. However, sound financial planning and a little bit of common sense can help to make sure that this never happens. Those who do find themselves in a position where they may need to declare bankruptcy should seek the advice of a financial planner before taking this option.

If you are thinking about bankruptcy but not sure if it is the right option for you call our friendly and professional staff at the Australian Bankruptcy Service toll free on 1800 462 767. Our toll free telephone line is open 24 hours everyday / 7 days a week.

All calls are free, entirely confidential and if required, anonymous.




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