Bankruptcy is obviously something that should be avoided if possible, but for some people it can be a necessary, and even beneficial choice. If you are struggling to make repayments toward your debts, are being hounded by creditors for payments, and have more financial obligations than money to service them – you may need to declare bankruptcy.

Bankruptcy is designed to mediate the impact of someone being unable to pay their debts. It is a legislated process by which any available funds or assets of the debtor (ie. yourself) are fairly distributed to creditors, whilst also providing the bankrupt person with protection from recovery action. It generally lasts for three years, although the effect on your credit file lasts for seven. There is also a permanent record kept on a government register, called the National Personal Insolvency Index.

To decide whether or not you need to become bankrupt, you should take an objective and logical look at your financial situation. The first step is to determine whether or not you are insolvent, as this is a requirement to declare bankruptcy. Sit down and work out your income and expenditure using your pay cycle as a time frame. Do you have more to pay out than you have money coming in? If the answer is yes, you are insolvent.

Now consider your own personal experience – are you able to cope with the demands for payment? Is your situation likely to improve in the near future? If your answers to these are “no”, then you need to take action now.

Do you stand to lose your employment or substantial assets if you were to declare yourself bankrupt? If so, you may want to consider entering into a Debt Agreement or a Personal Insolvency Agreement, which are arrangements that are governed by the Bankruptcy Act, but do not come with as many restrictions and repercussions as bankruptcy.

If, however, your situation does not allow you to consider one of these other options, you probably would need to consider declaring yourself bankrupt. But before you make the decision, call the Australian Bankruptcy Service today on 1800 462 767. We can take you through each step of the process, determining the severity of your situation, the impact bankruptcy would have on you, and whether or not you have any other options. Call us today for confidential and obligation-free advice. We are available 24 hours a day, 7 days a week.