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What Is It Like To Go Bankrupt1

What Is It Like To Go Bankrupt?

There’s no doubt that bankruptcy isn’t the most desirable situation to be dealing with. There are some serious financial penalties involved and it’s a very elaborate and stressful process that will affect you financially for a couple of years to come. Finding yourself in mountains of debt can come about very quickly, and lots of people find themselves in this situation as a result of a multitude of factors. Not having the opportunity to work resulting from illness is one of the most frequent reasons why people file for bankruptcy. It’s not like they had any control over the circumstances, but being unable to pay their debts simply because they have no income is the hard reality they must face. Actually, 7,900 people in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as rare as some people believe. In my opinion, bankruptcy is neither good nor bad. Indeed, those who file for bankruptcy have made some bad financial decisions and will reprimanded appropriately, but declaring bankruptcy is also the first step to financial freedom. A great deal of individuals struggle for years just to make ends meet, whilst their debts keep compounding, so in a lot of cases, bankruptcy is a chance for a fresh start for individuals that are unable to repay their debts.

 

Whilst I’ve never been bankrupt personally, I’ve witnessed the journey of lots of individuals who have and surprisingly, lots of people are better off and glad they underwent the process. If you’re experiencing financial difficulties and thinking about bankruptcy, this article will explain what life is like after you declare bankruptcy.

 

You Will Not Be Debt Free By Filing For Bankruptcy

 

Bankruptcy is quite complicated, and there is a frequent misconception that all debts are removed by declaring bankruptcy. This is certainly not the case. There are various sorts of debts that won’t be removed, including Centrelink debts, HECS debts, child support, court imposed fines (for instance speeding tickets), as well as money that is owed to an insurance company arising from a car accident where you were uninsured and at fault. On the other hand, filing for bankruptcy will eliminate debts like credit cards, GST and tax, and unsecured personal loans. The reality is, you will still have debts to pay after you declare bankruptcy, but the most critical debts in most cases, such as credit cards, will be removed.

 

Feelings Of Guilt And Shame Are Natural

 

Bankruptcy is a taxing process and many individuals who declare bankruptcy have feelings of regret and humiliation; as if they’ve lost in life. This is common, however it’s important to overcome these emotions because the reality is, humans make errors, and bankruptcy is a way that you can make a fresh start financially and get your life back on the right track. The sooner you recover from these feelings of humiliation, the sooner you’ll be able to start the recovery process and create a plan of how you’re going to repay your remaining debts and rebuild your credit report. Keep in mind, bankruptcy lasts for three years and after seven years, it will no longer appear on your credit rating, so it’s definitely not the end of the world.

 

You Can’t Borrow Any Money For Three Years

 

Unfortunately, by declaring bankruptcy you won’t be able to borrow any money under any circumstances for three years. During this time, it’s paramount that you start rebuilding your credit rating by maintaining a steady income and paying your bills and remaining debts on time. It’s simple but effective. After this three-year process, you become a discharged bankrupt and will have the opportunity to secure loans for secured assets like houses and cars, but your interest rates will be much higher because of your bad credit report. Although it’s not always advisable to acquire loans straight away, it is possible. After seven years from the time you became bankrupt, your credit rating will be clean, and you will have the option to receive all kinds of loans again at competitive rates.

 

Life after declaring bankruptcy obviously isn’t easy, but the emotional relief that many individuals experience after starting the process definitely softens the blow. There are some severe financial consequences involved, but declaring bankruptcy is the first step towards financial freedom and securing a bright future for you and your family. If you’re coping with financial distress, it’s always best to seek professional advice sooner rather than later. Whatever you do, don’t keep struggling financially for years because you’re afraid of the stigma associated with bankruptcy. It’s not easy, but it’s also not the end of the world. If you ‘d like to talk with someone about your financial situation, get in touch with Bankruptcy Experts Canberra on 1300 795 575 for a confidential discussion, or alternatively visit their website for more information: http://www.bankruptcyexpertscanberra.com.au

 

Sources:

 

https://www.afsa.gov.au/statistics/personal-insolvency-statistics-0