The decision to declare bankruptcy is a very personal one. Not only does it affect everyone differently, but everyone has very different feelings about it. Depending on your circumstances, it could either be something that should be avoided if possible, or a prudent financial decision.

The first thing to consider is whether or not declaring Bankruptcy would have any tangible effects on you, that is, on your assets or employment. Do you have a property, or maybe a vehicle or something else of value, that has available equity in it? If so, it is safe to assume that these things would be sold and the proceeds put towards your bankrupt estate. Do you need to hold a license that is specific to your trade? Or do you have a clause in your employment contract stating that you cannot go bankrupt? It is not the case for most, but some people can have their means of earning a living affected by declaring bankruptcy. If you fall into either of these categories, you will most likely want to try avoiding bankruptcy, and may want to consider a Debt Agreement or a Personal Insolvency Agreement as a solution to your debt problems.

If you do not have assets that you want to keep, or if your employment is not going to be affected by bankruptcy, then your main concerns would be the effect on your credit rating and/or the social stigma of bankruptcy. If this is the case, then you need to weigh these things up against your capacity to pay and your quality of life. Declaring bankruptcy will place a default on your credit file for seven years, which can seem like a long time. Many people are concerned about not being able to gain more credit during this time, or maybe a home loan. You have to ask yourself, though: do you want even more debt? If you continue on the way you are for another seven years, do you think that you will have managed to completely pay out your current debt? And are you actually going to be in a position to save a deposit and add a home loan to your commitments? If the answers to these questions are “no”, then Bankruptcy might be a worthwhile option for you.

Bankruptcy is obviously more complicated than this and there are many factors that may affect you that you will need to consider before making a decision. Therefore, we always recommend that you seek professional advice first so that you can make an educated decision. The consultants at the Australian Bankruptcy Service have years of experience in advising people about bankruptcy, and we also have a Registered Trustee in Bankruptcy on site, so you can trust that our advice is going to be 100% accurate.

Advice from the Australian Bankruptcy Service is available on our toll free telephone line 24 hours everyday / 7 days a week on 1800 462 767.

All calls are free, entirely confidential and if required, anonymous.