There’s no doubt that bankruptcy isn’t the most desirable situation to be facing. There are some serious financial implications involved and it’s a very difficult and stressful process that will affect you financially for years to come. Finding yourself in mountains of debt can develop in the blink of an eye, and lots of people find themselves in this situation because of a wide range of factors. Not being able 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 settle their debts because they have no income is the hard reality they have 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 may believe. If you ask me, I think that bankruptcy is neither good nor bad. Of course, those who declare bankruptcy have made some poor financial decisions and will penalised appropriately, however declaring bankruptcy is also the first step to financial freedom. Lots of folks struggle for years just to make ends meet, while their debts keep compounding, so in many cases, bankruptcy is a chance for a clean slate for people that are unable to repay their debts.
Though I’ve never been bankrupt myself, 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 difficulties and considering bankruptcy, this post will summarise what life is like after you declare bankruptcy.
You Won’t Be Debt Free By Declaring Bankruptcy
Bankruptcy is pretty complicated, and there is a standard 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 eliminated, for instance Centrelink debts, HECS debts, child support, court imposed fines (like speeding tickets), and also money that is owed to an insurance provider resulting from a car accident where you were uninsured and liable. Alternatively, filing for bankruptcy will clear debts such as credit cards, GST and tax, and unsecured personal loans. The reality is, you will still have debts to pay after you declare bankruptcy, but the most critical debts in most cases, such as credit cards, will be eliminated.
Feelings Of Guilt And Embarrassment Are Natural
Bankruptcy is an arduous process and lots of people who declare bankruptcy have feelings of remorse and humiliation; 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 errors, and bankruptcy is a way that you can start a new beginning 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 remaining debts and rebuild your credit history. Remember, 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 filing for bankruptcy you won’t be able to borrow any money under any circumstances for three years. During this time, it’s necessary that you start rebuilding your credit rating 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 chance to acquire loans for secured assets like houses and cars, but your interest rates will be much higher due to your bad credit rating. While it’s not always suggested 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 opportunity to acquire all kinds 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 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 encountering financial difficulties, 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 related to 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 condition, get in touch with Liquidation Service on 1300 795 575 for a confidential discussion, or alternatively visit their website for more information: www.liquidationservice.com.au