There’s no doubt that bankruptcy isn’t the best situation to be dealing with. There are some unpleasant financial penalties involved and it’s a very intricate and stressful process that will affect you financially for years to come. Finding yourself in mountains of debt can develop very quickly, and many individuals find themselves in this situation due to a wide variety of factors. Not having the opportunity to work due to illness is one of the most common reasons individuals file for bankruptcy. It’s not like they had any control over the circumstances, but being unable to pay off their debts due to the fact that they have no income is the hard reality they need to face. As a matter of fact, 7,900 individuals in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as rare as some people may believe. If you ask me, I think that bankruptcy is neither good nor bad. Without a doubt, those who declare bankruptcy have made some bad financial decisions and will reprimanded accordingly, nonetheless filing for bankruptcy is also the first step to financial freedom. Some people struggle for years just to make ends meet, even though their debts keep multiplying, so in most cases, bankruptcy is a chance for a fresh start for people that are unable to repay their debts.

 

Though I’ve never been bankrupt personally, I’ve witnessed the journey of many individuals who have and surprisingly, the majority of people are better off and glad they went through the process. If you’re experiencing financial distress and thinking about bankruptcy, this blog will summarise what life is like after you declare bankruptcy.

 

You Won’t Be Completely Debt Free By Declaring Bankruptcy

 

Bankruptcy is rather complicated, and there is a standard misconception that all debts are eliminated by declaring bankruptcy. This is certainly not the case. There are several debts that won’t be cleared, for example Centrelink debts, HECS debts, child support, court imposed fines (for instance speeding tickets), and also money that is owed to an insurance company resulting from a car accident where you were uninsured and liable. But, filing for bankruptcy will clear 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 critical debts in many cases, such as credit cards, will be removed.

 

Feelings Of Guilt And Embarrassment Are Natural

 

Bankruptcy is a stressful process and many individuals who declare bankruptcy have feelings of regret and shame; as if they’ve lost in life. This is natural, however it’s paramount to overcome these emotions because the fact 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 regret, the sooner you’ll be able to start the recovery process and work out a plan of how you’re going to repay your remaining debts and rebuild your credit rating. Don’t forget, bankruptcy lasts for three years and after seven years, it will no longer appear on your credit report, 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 critical that you start rebuilding your credit history by maintaining a regular 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 option to receive loans for secured assets like houses and cars, but your interest rates will be much higher as a result of your poor credit rating. Though it’s not always advisable to attain 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 sorts of loans again at competitive rates.

 

Life after filing for bankruptcy definitely isn’t easy, but the emotional relief that most people experience after starting the process definitely softens the blow. There are some serious financial consequences 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 dealing 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 fear the stigma connected with bankruptcy. It’s difficult, 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 Melbourne on 1300 879 867 for a confidential discussion, or alternatively visit their website for more information: www.bankruptcymelbourne.com

 

Sources:

 

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