The goal of bankruptcy is to ease one’s burden of unmanageable debt and to allow one to become financially rehabilitated. Whilst it may seem unpleasant to some at the time, the end result is that you will be able to start afresh.

Bankruptcy frees you from your obligations to pay your provable debts. Generally speaking, your provable debts will be your unsecured debts such as credit cards, store cards and personal loans. If you have secured debts and you stop paying them, those creditors will still be able to sell the asset (such as a home or vehicle) that is attached to the debt. If you still owe any money on that debt after the asset is sold, though, you will not have to pay that leftover amount. For more information on the debts that are included in bankruptcy, see this article. The financial relief that comes with bankruptcy is immediate, with your creditors being unable to contact you with demands for payment.

Bankruptcy will place a default on your credit file for a period of seven years, after which time it is completely removed. There is a permanent record kept on the National Personal Insolvency Index, but this is rarely accessed during a credit check as searching it incurs a fee. This default will keep you from gaining more credit during the period of your bankruptcy, which is usually three years. After your bankruptcy is over you will still have the default for the remainder of the seven years and it will be up to the creditor you apply with to decide if you are granted credit. During your bankruptcy, though, you will have learned to live without credit and to cover your costs with the funds you have available. In this way, you can ensure that you do not fall into the trap of unmanageable credit all over again.

For many people, bankruptcy can provide the clean slate they need to be able to free themselves of unmanageable debt and learn to live without credit. They are then in a position to be able to start afresh, with no debts hanging over their head and no dependency on credit facilities. If you think that bankruptcy might be the best choice for you, call us at the Australian Bankruptcy Service on 1800 462 767. We can give you advice on how bankruptcy is likely to affect you and if you have any other options you could consider first.