Youth bankruptcies blamed on mobiles
Mobile phone contracts and increased credit limits are being blamed for an increasing number of young people sinking into bankruptcy. Of the 1,093 Australians who were declared bankrupt in the last three months, it's estimated that half of those people are under the age of 35.
Jan Pentland, from Melbourne’s Eastern Access Community Health network, said that young people often become financially overcommitted, which she puts down to some “dodgy selling techniques” and a lot of advertising encouraging the young to become consumers. She says that having a mobile phone is a status symbol and that contracts are complicated and difficult to work out. It's almost as though there's too much choice, with many young people owning several mobile phones and running up debts they can't repay, Ms Pentland said.
Bankruptcy is the last option and often forces the young to turn to pawn shops and other marginal lenders, who charge very high interest rates. A bankrupt person remains officially bankrupt for three years and has a bad credit rating for seven years. The bad credit rating makes it difficult for the bankrupt person to be approved for home loans and even smaller personal loans.