What Is It Like To Go Bankrupt?

What Is It Like To Go Bankrupt?

There’s no doubt that bankruptcy isn’t the most desirable situation to be facing. There are some drastic financial penalties involved and it’s a very complex and stressful process that will affect you financially for years to come. Ending up in mountains of debt can develop in the blink of an eye, and many people find themselves in this situation as a result of a variety of factors. Not having the opportunity to work resulting from illness is one of the most common reasons why individuals file for bankruptcy. It’s not as if they had any control over the situation, but being unable to pay their debts because they have no income is the hard reality they need to face. In fact, 7,900 individuals in Australia declared bankruptcy in the March 2017 quarter1, so it’s not as uncommon as some people believe. In my opinion, bankruptcy is neither good nor bad. Of course, 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. A great deal of people struggle for years just to make ends meet, whilst their debts keep multiplying, so in most cases, bankruptcy is a chance for a clean slate for people that are unable to repay their debts.

 

Even though I’ve never been bankrupt personally, I’ve witnessed the journey of lots of people who have and surprisingly, the majority of people are better off and glad they underwent the process. If you’re facing financial distress and thinking about bankruptcy, this post will detail what life is like after you declare bankruptcy.

 

You Won’t Be Completely Debt Free By Filing For 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 several debts that won’t be cleared, including Centrelink debts, HECS debts, child support, court imposed fines (such as 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 such as 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 notable debts in many cases, such as credit cards, will be removed.

 

Feelings Of Regret And Shame Are Normal

 

Bankruptcy is a stressful process and most people who declare bankruptcy have feelings of guilt and embarrassment; as if they’ve lost in life. This is quite normal, however it’s important to overcome these emotions because the truth is, humans make errors, and bankruptcy is a way that you can start a new beginning financially and get your life back on the right track. The sooner you recover from these feelings of self-loathing, the sooner you’ll be able to start the recovery process and work out a plan of how you’re going to repay your outstanding debts and rebuild your credit rating. 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 filing for bankruptcy you won’t be able to borrow any money under any circumstances for three years. During this time, it’s vital that you start rebuilding your credit history by maintaining a stable 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 chance to obtain loans for secured assets like houses and cars, but your interest rates will be much higher due to your poor credit rating. Although it’s not always a good idea to acquire loans straight away, it is possible. After seven years from the time you became bankrupt, your credit report will be clean, and you will have the chance to secure all forms of loans again at competitive rates.

 

Life after declaring bankruptcy certainly isn’t easy, but the emotional relief that many people experience after starting the process certainly softens the blow. There are some serious 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 facing 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’re afraid of the stigma linked 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, contact Bankruptcy Experts Darwin on 1300 795 575 for a confidential discussion, or alternatively visit their website for more details: www.bankruptcyexpertsdarwin.com.au

 

Sources:

 

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

 

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