There’s no doubt that bankruptcy isn’t a desirable situation to be confronting. There are some major financial consequences 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 faster than you think, and many individuals end up in this situation as a result of a multitude of factors. Not being able to work resulting from illness is one of the most common reasons people declare bankruptcy. It’s not like they had any control over the situation, but being unable to pay their debts given that they have no income is the hard reality they must face. In reality, 7,900 individuals in Australia declared bankruptcy in the March 2017 quarter1, so it’s not as rare as some people think. In my opinion, bankruptcy is neither good nor bad. Of course, those who declare bankruptcy have made some bad financial decisions and will punished accordingly, however declaring bankruptcy is also the first step to financial freedom. A great deal of people struggle for years just to make ends meet, while their debts keep worsening, so in many cases, bankruptcy is an opportunity for a clean slate for people that are unable to repay their debts.

 

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

 

You Will Not Be Completely Debt Free By Declaring Bankruptcy

 

Bankruptcy is pretty complicated, and there is a typical misconception that all debts are eliminated by filing for bankruptcy. This is certainly not the case. There are a range of debts that won’t be cleared, for instance Centrelink debts, HECS debts, child support, court imposed fines (like speeding tickets), and also money that is owed to an insurance provider arising from a car accident where you were uninsured and at fault. But, filing for bankruptcy will eliminate debts like credit cards, GST and tax, and unsecured personal loans. The truth is, you will still have debts to pay after you file for bankruptcy, but the most significant debts in many cases, such as credit cards, will be eliminated.

 

Feelings Of Regret And Humiliation Are Standard

 

Bankruptcy is a taxing process and lots of folks who declare bankruptcy have feelings of guilt and humiliation; as if they’ve lost in life. This is standard, 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 the right track. The sooner you recover from these feelings of guilt, the sooner you’ll be able to begin the recovery process and work out a plan of how you’re going to repay your remaining debts and rebuild your credit report. Remember, 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 filing for bankruptcy you won’t be able to borrow any money under any circumstances for three years. During this time, it’s important that you start rebuilding your credit rating by maintaining a steady 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 chance to receive loans for secured assets like houses and cars, but your interest rates will be much higher due to your poor credit report. While it’s not always sensible to secure 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 secure all sorts of loans again at competitive rates.

 

Life after declaring bankruptcy certainly isn’t easy, but the emotional relief that most people experience after beginning the process definitely softens the blow. There are some severe financial implications involved, but declaring bankruptcy is the first step towards financial freedom and securing a bright future for you and your family. If you’re experiencing financial difficulties, it’s always best to seek professional advice sooner rather than later. Whatever you do, don’t keep struggling financially for years because you fear the stigma connected with bankruptcy. It’s challenging, but it’s also not the end of the world. If you ‘d like to speak with someone about your financial predicament, contact Bankruptcy Experts Whitsundays on 1300 795 575 for a confidential discussion, or alternatively visit their website for more details: http://www.bankruptcyexpertswhitsundays.com.au

 

Sources:

 

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