August 2, 2017 0

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 confronting. There are some drastic financial penalties involved and it’s a very difficult and stressful process that will affect you financially for a couple of years to come. Ending up in mountains of debt can happen faster than you think, and lots of individuals find themselves in this situation as a result of a wide variety of factors. Not having the capacity to work due to 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 repay their debts given that they have no income is the hard reality they need to face. Actually, 7,900 people in Australia filed for bankruptcy in the March 2017 quarter1, so it’s not as uncommon as some people may think. If you ask me, I think that bankruptcy is neither good nor bad. Certainly, those who file for bankruptcy have made some bad financial decisions and will penalised as necessary, but filing for bankruptcy is also the first step to financial freedom. Lots of folks struggle for years just to make ends meet, even though their debts keep worsening, so in many cases, bankruptcy is an opportunity for a new beginning for those people that are unable to repay their debts.

Whilst I’ve never been bankrupt myself, I’ve witnessed the journey of many individuals who have and surprisingly, most individuals are better off and glad they went through the process. If you’re facing financial difficulties and thinking about bankruptcy, this post will explain what life is like after you declare bankruptcy.

You Won’t Be Debt Free By Filing For Bankruptcy

Bankruptcy is rather complicated, and there is a common misconception that all debts are eliminated 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 (such as speeding tickets), as well as money that is owed to an insurance provider arising from a car accident where you were uninsured and in the wrong. But, filing for bankruptcy will clear debts like 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 substantial debts in many cases, such as credit cards, will be eliminated.

Feelings Of Regret And Embarrassment Are Regular

Bankruptcy is a stressful process and lots of folks who file for bankruptcy have feelings of remorse and shame; as if they’ve lost in life. This is quite natural, however it’s crucial 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 remorse, the sooner you’ll be able to begin the recovery process and create a plan of how you’re going to repay your outstanding debts and rebuild your credit rating. 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 vital that you start rebuilding your credit report 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 opportunity to receive loans for secured assets like houses and cars, but your interest rates will be much higher due to your bad credit rating. Although 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 chance to secure all kinds of loans again at competitive rates.

Life after filing for bankruptcy definitely isn’t easy, but the emotional relief that many individuals experience after starting the process definitely softens the blow. There are some heavy financial penalties 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 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 challenging, but it’s also not the end of the world. If you ‘d like to talk with someone about your financial state of affairs, get in touch with Fresh Start Solutions Canberra on 1300 818 575 for a confidential discussion, or alternatively visit their website for additional information: https://freshstartsolutions.com.au/bankruptcy-canberra

Sources:

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

 

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