August 2, 20170

What Is It Like To Go Bankrupt?

Posted by:Charles Bosse onAugust 2, 2017

There’s no question that bankruptcy isn’t the most desirable situation to be grappling with. There are some serious financial consequences involved and it’s a very intricate and stressful process that will affect you financially for a couple of years to come. Ending up in mountains of debt can materialise very rapidly, and lots of people find themselves in this situation because of a variety of factors. Not having the opportunity to work resulting from illness is one of the most common reasons people file for bankruptcy. It’s not as if they had any control over the situation, but being unable to settle their debts given that they have no income is the hard reality they have to face. In truth, 7,900 people in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as unusual as some people think. If you ask me, I think that bankruptcy is neither good nor bad. Certainly, those who declare bankruptcy have made some bad financial decisions and will penalised appropriately, but filing for bankruptcy is also the first step to financial freedom. Many folks struggle for years just to make ends meet, even though their debts keep multiplying, so in many cases, bankruptcy is an opportunity for a clean slate for those people that are unable to repay their debts.

Though I’ve never been bankrupt personally, I’ve witnessed the journey of lots of people who have and surprisingly, most individuals are better off and glad they underwent the process. If you’re encountering financial problems and contemplating bankruptcy, this blog will illustrate what life is like after you declare bankruptcy.

You Will Not Be Completely Debt Free By Declaring Bankruptcy

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

Feelings Of Remorse And Humiliation Are Natural

Bankruptcy is a demanding process and many people who declare bankruptcy have feelings of remorse and shame; as if they’ve lost in life. This is quite normal, however it’s necessary to overcome these emotions because the reality 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 begin the recovery process and develop 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 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 crucial that you start rebuilding your credit rating by maintaining a consistent 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 receive loans for secured assets like houses and cars, but your interest rates will be much higher as a result of your poor credit report. Even though it’s not always appropriate to attain 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 option to receive all types of loans again at competitive rates.

Life after declaring bankruptcy surely isn’t easy, but the emotional relief that many individuals experience after beginning the process certainly softens the blow. There are some heavy 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 hardship, it’s always best to seek professional advice sooner rather than later. Whatever you do, don’t keep struggling financially for years because you’re afraid of the stigma associated with bankruptcy. It’s difficult, but it’s also not the end of the world. If you ‘d like to talk to someone about your financial predicament, reach out to Fresh Start Solutions Brisbane on 1300 818 575 for a confidential discussion, or alternatively visit their website for more information: http://freshstartsolutions.com.au/bankruptcy-brisbane

Sources:

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

 

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