What Is It Like To Go Bankrupt?

There’s no doubt that bankruptcy isn’t a desirable scenario to be experiencing. There are some severe financial penalties involved and it’s a very difficult and stressful process that will affect you financially for a couple of years to come. Finding yourself in mountains of debt can materialise very quickly, and lots of individuals end up in this situation because of a number of factors. Not having the ability to work resulting from illness is one of the most frequent reasons why individuals file for bankruptcy. It’s not like they had any control over the situation, but being unable to pay off their debts since they have no income is the hard reality they must face. In truth, 7,900 individuals in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as uncommon as some people may believe. If you ask me, I think that bankruptcy is neither good nor bad. Certainly, those who file for bankruptcy have made some poor financial decisions and will penalised as necessary, but filing for bankruptcy is also the first step to financial freedom. Some folks struggle for years just to make ends meet, whilst their debts keep compounding, so in most cases, bankruptcy is an opportunity for a new beginning for those individuals that are unable to repay their debts.

 

While I’ve never been bankrupt personally, I’ve witnessed the journey of lots of individuals who have and surprisingly, lots of people are better off and glad they underwent the process. If you’re enduring financial hardship and contemplating bankruptcy, this post will summarise what life is like after you file for bankruptcy.

 

You Will Not Be Debt Free By Filing For Bankruptcy

 

Bankruptcy is quite complicated, and there is a general misconception that all debts are cleared by filing for bankruptcy. This is definitely not the case. There are several debts that won’t be eliminated, including Centrelink debts, HECS debts, child support, court imposed fines (for instance speeding tickets), as well as money that is owed to an insurance company arising from a car accident where you were uninsured and in the wrong. Conversely, 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 declare bankruptcy, but the most notable debts in most cases, such as credit cards, will be cleared.

 

Feelings Of Guilt And Shame Are Normal

 

Bankruptcy is a taxing process and lots of people who file for bankruptcy have feelings of remorse and humiliation; as if they’ve lost in life. This is natural, however it’s crucial to overcome these emotions because the fact is, humans make errors, 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 guilt, the sooner you’ll be able to start the recovery process and create a plan of how you’re going to repay your outstanding debts and rebuild your credit report. Bear 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 imperative that you start rebuilding your credit rating 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 option to secure loans for secured assets like houses and cars, but your interest rates will be much higher as a result of your poor credit report. While it’s not always appropriate to obtain 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 forms of loans again at competitive rates.

 

Life after filing for bankruptcy clearly isn’t easy, but the emotional relief that most people experience after starting the process certainly softens the blow. There are some substantial financial repercussions 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 associated with bankruptcy. It’s challenging, but it’s also not the end of the world. If you ‘d like to talk to someone about your financial situation, get in contact with Bankruptcy Experts Sydney on 1300 795 575 for a confidential discussion, or alternatively visit their website for additional information: http://www.bankruptcyexpertssydney.com.au

 

Sources:

 

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