There are a lot of bankruptcy myths and truths, but the truth lies somewhere in the between. Our insolvency team explains bankruptcy in detail in this article. Depending on who you hear it from and what you hear, declaring bankruptcy can either be the solution to your debt issues or it might put you on the fast track to financial ruin.
Financial stress is something you are familiar with if you are in debt. It continues beyond your pocket. It has an impact on all aspects of your life, including your relationships, work performance, and health. It’s as though you’re stranded in a maze. At that point, you begin to consider the effects of bankruptcy. Should you, however?
Your mother claims that it is a wise decision. Your hairdresser claims that it devastated the life of the brother of her sister’s best friend.
Google claims… Google says a lot of things, I suppose. This is how bankruptcy facts and myths are created, and this is also true for financial advice. The truth is, as you’re about to learn, there are just as many ways to get out of debt as there are ways to get into it, and declaring bankruptcy is merely one of them. It might or might not be a great choice for you. It is unquestionably preferable to heed the counsel of a bankruptcy specialist over that of your mother or a hairdresser.
What negative effects might bankruptcy have?
There are a few things to think about before you start searching for “How to apply for bankruptcies in Australia.”
Our expert claims that for petitions for bankruptcy that have been authorized, AFSA assigns a “trustee” to oversee the bankruptcy. Throughout the course of your bankruptcy, “your assigned trustee works directly with you” and represents you before creditors.
It’s crucial to comprehend the advantages and disadvantages of bankruptcy. If you possess a property, for instance, your trustee might consider selling the asset and giving the revenues to your creditors. There are numerous effects and factors to take into account.
The following are a few effects of bankruptcy:
- Your name being listed on the National Personal Insolvency Index indefinitely
- Your credit report will reflect the bankruptcy for five years.
- Your capacity to get credit in the future, such as a mortgage
- Depending on your income, you could have to make financial contributions to your creditors.
- The effect on your ability to obtain particular jobs or careers in the present or in the future
- being prohibited from leaving the country during the bankruptcy without your trustee’s express authorization
There are also practical factors to keep in mind. Your credit cards, for instance, would be confiscated. People with cash flow issues frequently struggle to make their money last from pay to pay when they don’t have access to credit. For those going through bankruptcy, budgeting is crucial for a number of reasons.
Dispelling common misconceptions about bankruptcy
People frequently have preconceived notions about bankruptcy, which is one problem, claims Damian. Making sure that people base their decisions on reality rather than fiction is my responsibility.
What are some common fallacies about bankruptcy, and what does our specialist in insolvency have to say about them?
Myth 1: “I’ll be destroyed by bankruptcy.”
Yes, impact your life. No, ruin your life. There is no getting around the fact that bankruptcy will affect your life. Bankruptcy has unquestionably terrible repercussions, so at CrossRoads we view it as a last resort.
However, it frequently serves as the impetus for a new beginning that might not otherwise be possible without declaring bankruptcy. It has the power to completely change your life if used in conjunction with a plan that focuses on creating excellent money habits. But first, you need to make a thorough budget plan and look at all of your other options. Only then will you be able to decide for sure if bankruptcy is the best option.
Myth 2: Filing for bankruptcy is a fast answer for debt issues.
Unfortunately, there are no easy remedies for debt—I wish it were the case. The bankruptcy process itself takes three years, and it appears on your credit report for a further two years. Because of this, our main goal is to assist clients in avoiding personal insolvency wherever possible.
We achieve this through customized personal budgeting and by handling the grunt work for our clients, such as paying their bills, saving money, and dealing with their creditors. Budgeting and money management assistance are even more crucial if it turns out that filing for bankruptcy is the best course of action because you’ll be starting a three to five-year period of cautious money management.
Myth 3: I won’t ever be able to borrow money again, according to
This is not true. The National Personal Insolvency Index will have your name on it, but it doesn’t mean you can never borrow money again. Banks and lenders will evaluate your applications once you have received your bankruptcy discharge, just like they would for anyone else. But what creditors really want is assurance that you’ll be able to repay their loans and credit.
We advise you to see the time you spent in bankruptcy as a test to see if you can manage your money well. Achieve your savings objectives by developing good habits around money and how you spend it. That may be putting money away for a down payment on a home, a vacation, a new car, or anything else is essential to you. As our customer, our Loans Team might even be able to help you out with financing directly.
Myth 4: “Bankruptcy is socially stigmatized.”
Financial stress is pervasive, and bankruptcy is more widespread than most people realize, according to Damien. For context, from 2018 to 2019, there were approximately 15,000 bankruptcies in Australia. A bankrupt individual doesn’t stand out because they appear to be just like everyone else. You won’t receive a neon sign or t-shirt from AFSA.
You could be required to reveal that you are bankrupt in some circumstances, such as certain professions, although these scenarios are quite particular. Otherwise, you are entirely free to decide who you tell. At CrossRoads, we don’t think anything less of our clients than exceptional people who are ready to accept change for themselves and their family.
We’re here to assist you in comprehending the effects of bankruptcy.
The last bit of advice from us is to schedule a free budget consultation with CrossRoads if you’re having financial difficulties. We’ll examine your financial situation, assist you in comprehending the effects of bankruptcy, and assist you in weighing all of your options. If declaring bankruptcy is the best course of action, our insolvency specialists will outline the procedure, guide you through it, and ensure that you get back on your feet. You don’t have to handle it alone.
Have a conversation with us right away if you still need clarification on how bankruptcy functions or assistance distinguishing misconceptions from realities.
Please phone 0410 555 999 for further information.