What is the Impact of Bankruptcy?
Being declared bankrupt can be a really daunting and overwhelming experience. You may be worried about what the future holds – both personally and financially, as well as dealing with day to day life. Yet bankruptcy doesn’t mean the end of the world. Knowing as much as possible about what bankruptcy entails and understanding the impact of it for you can help you to navigate a potentially difficult situation in the best way possible.
It’s no secret that bankruptcy may lead to bad credit. This is often inevitable and there’s very little you can do about it, but there are ways that you can lessen the impact of bankruptcy and you should be able to borrow money again in the future as and when you need it.
Firstly you need to understand what bankruptcy is. It is generally referred to as a legal process, which releases a person from almost all of their debts.
You may have applied to become bankrupt of your own accord – possibly because you have debts that you can not afford to repay. In this case, you’ll be referred to as a voluntary bankrupt. Within two weeks, you’ll be appointed a trustee from the AFSA who will deal with all of your financial affairs. Depending on your personal circumstances you may be charged a fee.
If you have not declared yourself bankrupt voluntarily, it’s likely that you have been forced into bankruptcy by creditors trying to recover debts that you owe them. In this case, you will require a private trustee who will often charge you very high fees to manage your financial situation from this point.
Impacts of bankruptcy
It can be very stressful learning about the impacts of bankruptcy yet it’s necessary to know as much as possible. Here are some of the main ways that being declared bankrupt may affect you and your future.
Your credit score will be affected:
your bankruptcy will be recorded on your credit file and it will remain on there for up to 5 years from the date you were declared bankrupt. It’s highly likely that bankruptcy may lead to bad credit so you need to be prepared to face rejections from certain types of lending during the period after you have been declared bankrupt.
If you are borrowing over a set amount, you may have to declare your bankruptcy on loans well into the future. Don’t panic though, there are many lenders who work specifically with people with bad credit who will be able to help you after the initial period of bankruptcy.
Future job applications may be affected:
when you are declared bankrupt, your name is recorded on a National Personal Insolvency Index (NPII). This is a public register than lists insolvency proceedings across Australia and can be searched by employers or creditors looking into your financial history. If you have been declared bankrupt in the past, some employers may be unwilling to hire you.
Future travel could be impacted:
if you are within the immediate time period after being declared bankrupt, you will need to request permission from your appointed trustee if you wish to travel overseas. Approval is not guaranteed and you should be aware that it’s an offence to travel overseas without written consent from your trustee.
Loss of assets:
although you’ll be able to keep household and personal goods such as your television or computer, you could stand to risk larger assets such as your home or your car. If you have money in your bank accounts totalling over $1000, you may lose this also.
Measuring the impact of bankruptcy
It’s hard to measure the true impact of bankruptcy as it’s likely to be different for each individual and their personal circumstances. For many people, the fact that bankruptcy may lead to bad credit is one of the biggest obstacles to overcome – yet for others, they find the lack of freedom to travel or the seizing of assets to be more stressful and to have a greater impact on their day to day life.
Getting help after you’ve been declared bankrupt is really important and finding the right lender for you will ensure things are made as smooth as possible.
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