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What Is It Like To Go Bankrupt?

What Is It Like To Go Bankrupt?

There’s no doubt that bankruptcy isn’t the ideal situation to be grappling with. There are some severe financial penalties involved and it’s a very complicated and stressful process that will affect you financially for years to come. Finding yourself in mountains of debt can come about very quickly, and lots of people end up in this situation as a result of a variety of factors. Not having the opportunity to work due to illness is one of the most frequent reasons why individuals declare bankruptcy. It’s not as if 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 need to face. In truth, 7,900 people in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as unusual as some people believe. In my opinion, bankruptcy is neither good nor bad. Of course, those who file for bankruptcy have made some bad financial decisions and will reprimanded appropriately, however filing for bankruptcy is also the first step to financial freedom. A great deal of individuals struggle for years just to make ends meet, while their debts keep compounding, so in many cases, bankruptcy is a chance for a new beginning for those that are unable to repay their debts.

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

You Won’t Be Completely Debt Free By Declaring Bankruptcy

Bankruptcy is quite complicated, and there is a typical misconception that all debts are removed by declaring bankruptcy. This is definitely not the case. There are a range of debts that won’t be removed, for instance Centrelink debts, HECS debts, child support, court imposed fines (like speeding tickets), and money that is owed to an insurance provider arising from a car accident where you were uninsured and in the wrong. Conversely, declaring bankruptcy will clear debts like credit cards, GST and tax, and unsecured personal loans. The fact 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 Embarrassment Are Ordinary

Bankruptcy is a stressful process and many individuals who file for bankruptcy have feelings of guilt and shame; as if they’ve lost in life. This is quite regular, however it’s crucial 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 the right track. The sooner you recover from these feelings of shame, the sooner you’ll be able to begin the recovery process and develop a plan of how you’re going to repay your remaining debts and rebuild your credit rating. Just remember, bankruptcy lasts for three years and after seven years, it will no longer appear on your credit history, so it’s certainly 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 crucial that you start rebuilding your credit report by maintaining a consistent 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 attain loans for secured assets like houses and cars, but your interest rates will be much higher due to your poor credit history. Though it’s not always suggested 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 acquire all sorts of loans again at competitive rates.

Life after filing for bankruptcy obviously isn’t easy, but the emotional relief that most individuals experience after starting the process definitely softens the blow. There are some substantial financial penalties involved, but filing for bankruptcy is the first step towards financial freedom and securing a bright future for you and your family. If you’re facing financial problems, 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 related to bankruptcy. It’s difficult, but it’s also not the end of the world. If you ‘d like to talk to someone about your financial state of affairs, contact Bankruptcy Experts Cassowary Coast on 1300 795 575 for a confidential discussion, or alternatively visit their website for more information: http://www.bankruptcyexpertscassowarycoast.com.au

Sources:

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