There’s no doubt that bankruptcy isn’t a desirable scenario to be grappling with. There are some severe financial implications 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 transpire in a heartbeat, and many individuals end up in this situation because of a wide variety of factors. Not having the capacity to work resulting from illness is one of the most frequent reasons why people declare bankruptcy. It’s not like they had any control over the situation, but being unable to pay off 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 rare as some people may believe. If you ask me, I think that bankruptcy is neither good nor bad. Of course, those who file for bankruptcy have made some poor financial decisions and will reprimanded accordingly, but declaring bankruptcy is also the first step to financial freedom. A great deal of people struggle for years just to make ends meet, even though their debts keep worsening, so often times, bankruptcy is an opportunity for a new beginning for individuals 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, the majority of people are better off and glad they underwent the process. If you’re facing financial difficulties and contemplating bankruptcy, this article will summarise what life is like after you file for bankruptcy.
You Won’t Be Completely Debt Free By Declaring Bankruptcy
Bankruptcy is quite complicated, and there is a common misconception that all debts are removed by filing for bankruptcy. This is definitely not the case. There are several debts that won’t be eliminated, for example Centrelink debts, HECS debts, child support, court imposed fines (like speeding tickets), and 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 remove debts like credit cards, GST and tax, and unsecured personal loans. The reality is, you will still have debts to pay after you file for bankruptcy, but the most notable debts in most cases, such as credit cards, will be cleared.
Feelings Of Remorse And Shame Are Natural
Bankruptcy is an arduous process and many people who file for bankruptcy have feelings of regret and embarrassment; as if they’ve lost in life. This is quite standard, however it’s paramount to overcome these emotions because the reality is, humans make mistakes, and bankruptcy is a way that you can go back to square one financially and get your life back on the right track. The sooner you recover from these feelings of embarrassment, 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 report. Remember, bankruptcy lasts for three years and after seven years, it will no longer appear on your credit history, so it’s definitely 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 vital that you start rebuilding your credit history by maintaining a regular 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 history. Though it’s not always recommended to acquire loans straight away, it is possible. After seven years from the time you became bankrupt, your credit rating will be clean, and you will have the option to secure all sorts of loans again at competitive rates.
Life after declaring bankruptcy certainly isn’t easy, but the emotional relief that most individuals experience after starting the process certainly softens the blow. There are some considerable financial consequences involved, but declaring bankruptcy is the first step towards financial freedom and securing a bright future for you and your family. If you’re enduring 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’re afraid of the stigma linked with 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 predicament, reach out to Bankruptcy Experts Frankston on 1300 795 575 for a confidential discussion, or alternatively visit their website for more information: www.bankruptcyexpertsfrankston.com.au