What Is It Like To Go Bankrupt?

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Bankruptcy,Bankruptcy Advice,Insolvency

There’s no doubt that bankruptcy isn’t the best situation to be experiencing. There are some serious financial implications involved and it’s a very complicated and stressful process that will affect you financially for years to come. Ending up in mountains of debt can happen in a heartbeat, and many individuals end up in this situation due to a wide variety of factors. Not being able to work due to illness is one of the most frequent reasons people file for bankruptcy. It’s not as if they had any control over the situation, but being unable to pay their debts since they have no income is the hard reality they must face. In fact, 7,900 individuals in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as rare as some people may think. In my opinion, bankruptcy is neither good nor bad. Yes, those who file for bankruptcy have made some poor financial decisions and will punished accordingly, but declaring bankruptcy is also the first step to financial freedom. A great deal of folks struggle for years just to make ends meet, whilst their debts keep worsening, so in a lot of cases, bankruptcy is a chance for a fresh start for those individuals that are unable to repay their debts.

While I’ve never been bankrupt myself, I’ve witnessed the journey of lots of people who have and surprisingly, lots of people are better off and glad they went through the process. If you’re experiencing financial difficulties and thinking about bankruptcy, this article will describe what life is like after you file for bankruptcy.

You Will Not Be Completely Debt Free By Declaring Bankruptcy

Bankruptcy is quite complicated, and there is a general misconception that all debts are cleared by filing for bankruptcy. This is certainly not the case. There are various sorts of debts that won’t be eliminated, for instance Centrelink debts, HECS debts, child support, court imposed fines (for example speeding tickets), as well as money that is owed to an insurance company resulting from a car accident where you were uninsured and at fault. Alternatively, filing for bankruptcy will clear debts such as credit cards, GST and tax, and unsecured personal loans. The truth is, you will still have debts to pay after you declare bankruptcy, but the most notable debts in most cases, such as credit cards, will be cleared.

Feelings Of Guilt And Shame Are Ordinary

Bankruptcy is a stressful process and lots of people who declare bankruptcy have feelings of guilt and shame; as if they’ve lost in life. This is quite regular, however it’s paramount to overcome these emotions because the reality is, humans make mistakes, and bankruptcy is a way that you can make a fresh start financially and get your life back on track. The sooner you recover from these feelings of embarrassment, the sooner you’ll be able to begin the recovery process and craft a plan of how you’re going to repay your remaining debts and rebuild your credit history. Keep in mind, bankruptcy lasts for three years and after seven years, it will no longer appear on your credit rating, so it’s certainly not the end of the world.

You Can’t Borrow Any Money For Three Years

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

Life after declaring bankruptcy surely isn’t easy, but the emotional relief that many individuals experience after starting the process certainly softens the blow. There are some significant 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 encountering financial problems, it’s always best to seek professional advice sooner rather than later. Whatever you do, don’t keep battling financially for years because you fear the stigma related to bankruptcy. It’s not easy, but it’s also not the end of the world. If you ‘d like to talk to someone about your financial state of affairs, reach out to Bankruptcy Advice Perth on 1300 879 867 for a confidential discussion, or alternatively visit their website for additional information: www.bankruptcy-advice.com.au/perth

Sources:

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

 

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