According to a recent report by the Australian Financial Security Authority, the number of Australians declaring bankruptcy has soared to over 18,600 per annum in the last two years.

Australian Bankruptcy Services (ABS) has collated the results of several databases and studies, both here in Australia and overseas, to identify the most common factors leading to people filing for bankruptcy:

1. Medical expenses – A Harvard study from 2007 showed that medical expenses were the reason for 62% of all bankruptcy filings. Medical bills can be astronomical and have a heavy impact on one’s financial health, especially when they are unexpected.
2. Debt collection litigation – A 2013 study conducted by the Centre for Consumer Recovery showed that the cost of being sued by debt collection agencies was the cause of filing for bankruptcy for 74% of their research sample.
3. Redundancy or unemployment – An exceedingly common reason is finding oneself suddenly unemployed or made redundant, as it often leaves one unable to pay their debts and with no other alternative but to declare bankruptcy.
4. Credit card debt and frivolous and irresponsible spending – Lack of budgeting and frivolous spending are both leading causes of people finding themselves needing bankruptcy. The media places a huge and tempting emphasis on personal image over finances, but choosing short-term gratification over long-term financial stability will eventually lead to the demise of many peoples’ financial situations.
5. Unexpected life events such as divorce or disability – Such incidents can have a devastating impact not only on emotional and physical health, but also financial well being. The unexpected and negative nature of such events can have a debilitating effect on people’s finances, and often leads to the need to declare bankruptcy.

If you have experienced, or are experiencing any of the above, you are likely to be in a position where you are facing the prospect of bankruptcy or in need of bankruptcy alternatives in order to improve your financial situation.

The ABS website has been designed to give you the right advice about your bankruptcy options in an easily accessible format. Our team of professional and licensed bankruptcy specialists can provide you with free expert advice and can also offer a comprehensive financial assessment.