There’s no doubt that bankruptcy isn’t the best situation to be confronting. There are some unpleasant financial penalties involved and it’s a very exhausting and stressful process that will affect you financially for a couple of years to come. Ending up in mountains of debt can happen in the blink of an eye, and many people end up in this situation because of a wide range of factors. Not being able to work due to illness is one of the most common reasons why people file for bankruptcy. It’s not as if they had any control over the situation, but being unable to settle their debts due to the fact that they have no income is the hard reality they have to face. In fact, 7,900 people in Australia declared bankruptcy in the March 2017 quarter1, so it’s not as uncommon as some people think. In my opinion, bankruptcy is neither good nor bad. Of course, those who declare bankruptcy have made some bad financial decisions and will punished accordingly, however 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 compounding, so in many cases, bankruptcy is a chance for a clean slate for those that are unable to repay their debts.

While I’ve never been bankrupt personally, I’ve witnessed the journey of many people who have and surprisingly, most people are better off and glad they went through the process. If you’re experiencing financial difficulties and considering bankruptcy, this blog will describe what life is like after you file for bankruptcy.

You Won’t Be Debt Free By Filing For Bankruptcy

Bankruptcy is quite complicated, and there is a general misconception that all debts are removed by declaring bankruptcy. This is certainly not the case. There are several debts that won’t be eliminated, including Centrelink debts, HECS debts, child support, court imposed fines (like speeding tickets), and money that is owed to an insurance provider resulting from a car accident where you were uninsured and in the wrong. Conversely, filing for bankruptcy will clear 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 significant debts in many cases, such as credit cards, will be eliminated.

Feelings Of Remorse And Humiliation Are Natural

Bankruptcy is a demanding process and lots of folks who file for bankruptcy have feelings of guilt and shame; as if they’ve lost in life. This is quite regular, however it’s important to overcome these emotions because the truth is, humans make errors, and bankruptcy is a way that you can go back to square one financially and get your life back on track. The sooner you recover from these feelings of regret, 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 rating, 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 history 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 acquire loans for secured assets like houses and cars, but your interest rates will be much higher due to your bad credit report. Though it’s not always a good idea to secure 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 chance to receive all forms of loans again at competitive rates.

Life after filing for bankruptcy obviously isn’t easy, but the emotional relief that most people experience after beginning the process definitely softens the blow. There are some substantial 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 encountering financial distress, 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 associated 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 circumstances, get in contact with Bankruptcy Experts Rockingham on 1300 795 575 for a confidential discussion, or alternatively visit their website for additional information: http://www.bankruptcyexpertsrockingham.com.au

Sources:

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